Navra fund

[dee]

Ok not strictly property investment
I was wondering how those who bought into the fund have found it.
Its over a yr now, and there was a thread back waiting for >1yr to allow for a better assessment. Looks like they did not charge a performance fee last yr as they underperformed.
I did steves seminar last yr and wanted to wait a while to see how the fund went.
Would you margin loan into it? ie do u think it will consistently beat 7-8% interst on margin.
How would you compare it to say colonial first state imputation.

[Andrew]

I've pulled my money out of the fund. Didn't live up to expectations for me.
12% since inception hasn't even outperformed the indexes so I'm out.

andy

[NigelW]

I've pulled my money out of the fund. Didn't live up to expectations for me.
12% since inception hasn't even outperformed the indexes so I'm out.

andy

Andrew

It's a fact that the fund didn't outperform the index. But two questions spring to mind:

1) why is that?
2) how has it performed in the volatile market conditions we've had this financial year?

Let's look at the second question first. The fund has outperformed the relevant index by nearly 2% in the period from 1 July to 28 July. To be sure that's only a very short period, but it suggests that the methodology which underlies the fund works reasonably well in volatile market conditions. .

In answer to the first question, ask yourself this: what was the index on 1 May when the fund launched and what was it 30 June?

At inception the index was around 3000. At 30 June it was approx 3350. If you look at a chart (and I don't have the tech skills to put one in here) it's almost a 45 degree line heading up to the right. That market is exactly the wrong "shape" for the strategy of buy low sell high to work, rather it supports a "buy wherever and sell higher" approach (aka the greater fools theory). I think the fact that the fund performed as it did during an extraordinary market bull run is quite good really.

You should also remember that due to the red tape of getting licensed etc, the fund didn't get going until May 03. That meant the fund missed the buying opportunities presented by an almost 400 point fall from Jan 03 - mid april 03. (Bugger! :( ).

I don't want to speak for Steve, Bill and the team and NI (I know Steve can definitely speak for himself :rolleyes: ) but my view is that you need to take a 3-5year view (as you would with any managed fund investing in Australian equities) so that you can get a true picture. The "herd" mentality would suggest bailing out when things aren't meeting your expectations, but I think, with respect, that if you do so you're taking a very short-sighted view.

You're right to review the performance of your various investments, but don't throw the baby out with the bathwater! :eek:

(Declaration of interest - I have units in the fund and shares in the company and plan on keepin em! :D )

Cheers
N.

[Mark Laszczuk]

Dee,
I put my money in there at inception, pulled most out to purchase shares in Navra Invest, have been putting money back in when I can. I tend not to look at one year performance as an indicator of a fund's performance. MF's are a longer term investment and should be treated as such. My opinion (note I said OPINION here) is you could do worse than putting your money into the fund. But then again, I've had the opportunity to see what Steve's system can really do first hand, as he's shown me some of his personal trading returns, and let me just say they weren't too shabby!

Andrew,
It's a shame that the fund didn't live up to your expectations.... But what were you expecting? Huge returns after only one year? Did you read the prospectus? Do you even understand the style of trading that the fund uses? When you take all of the factors into account (trading style, share market performance, etc.) the fund did very very well for it's first twelve months. But then again, if receiving a 12% return on your money without being charged a fee for it 'doesn't live up to your expectations', then maybe you ARE better off putting your money into a different fund that will charge you whether they make money for you or not.

[Andrew]

I knew I would get jumped all over for that one. My expectations were higher
because of the wonderful graphs Steve showed at his seminars which were not
lived up to in the first twelve months.

I've determined that I can get higher returns by putting my money into
renovations for the time being.

Only time will tell whether it is the sellers or the holders who are being
short-sighted. With all due respect, you guys worry about your investment
returns and I'll take care of mine.

andy

Disclaimer: I also have shares in the navra company, but no money in the funds.

[NigelW]

I knew I would get jumped all over for that one. My expectations were higher
because of the wonderful graphs Steve showed at his seminars which were not
lived up to in the first twelve months.

I've determined that I can get higher returns by putting my money into
renovations for the time being.

Only time will tell whether it is the sellers or the holders who are being
short-sighted. With all due respect, you guys worry about your investment
returns and I'll take care of mine.

andy

Disclaimer: I also have shares in the navra company, but no money in the funds.

"Jumped all over"? No. I'm just putting forward my opinion, as you have yours, in a public forum to (hopefully) give Dee the benefit of some divergent views.

I agree renovation can give great returns - it's part of my total strategy (doing another one at the moment in fact ;) ).

Happy to let you worry about your investment returns - mine are the only ones that I care about! :D

Best of luck
N.

[TryHard]

Hi guys

We stuck some reasonably significant amounts (for us anyway) in the Navra fund (we also own some shares in the company) but finally found an IP worth drawing the money out for in the last few weeks. We had about 6 months in the fund.

Steve's suggestion is (if I listened correctly) use the fund as a reasonably low risk vehicle to hold your money and earn some returns, until you have the ability to invest in the next IP, rather than wasting any equity you might have by leaving your money dormant.

Which is what we did. We earned around 10 % on our money in the Navra fund while paying about 6% on our LOC for the money, so we made a bit of dough, and we're now comfortable we found a property that will yield us better than that - at least over the next 10 year period we judged the particular investment on.

Personally, we found Steve Navra and his advice a fantastic help. We don't think you could go wrong following the principles he teaches. As outlined elsewhere, this is OUR OPINION (based on OUR EXPERIENCE) :-)

Your money is put in blue chip Australian equities, and then only the pick of those, managed by arguably the most knowledgeable people involved in the industry. We judge people on their results, and they certainly got the results for us, considering the risk involved was not huge.

I sincerely doubt Steve would suggest you shouldn't put your money toward property improvements if they will generate a comparable return from increased yield in income and capital growth. In fact my understanding was that's part of what he suggests you do with your money. If I remeber correctly, he clearly states acquisition and improvement of property is a key to your future financial success.

I don't know if Steve's presentation has changed, but he was pretty clear to us that there were no guarantees, you are after all dealing in the share market. He did also explain the graph we saw was based on certain criteria that may not be repeated etc etc.

The Navra fund is part of a journey to long-term capital wealth. The suitability of the fund for an individual's investment strategy depends on the investor's own portfolio and their financial position. It definitely benefitted us, and will again, when we next have some equity we want to put to use, while we use it to build up sufficient funds to buy another property to add to our growth portfolio.

12% not having outperformed the indexes is kind of irrelevant unless you have the requisite expertise to do better yourself. We also have a SMSF which overall thankfully did even better than Navra, but only because a couple of stocks blitzed it, the other stocks in our portfolio (all blue chip well-researched and safe as houses medium growth prospects) did about 3 %.

Good luck making a balanced decision :-)

TryHard

[geoffw]

A small additional point.

If you bought in a fund which followed the index, you would also probably be paying some sort of admion fee. Steve's fund did not charge any fee, as it did not perform to the asx.

[Bill.L]

Hi all,

Nigel, thanks for your "informed" opinion...

"but my view is that you need to take a 3-5year view (as you would with any managed fund investing in Australian equities) so that you can get a true picture."

perhaps a little reality on the situation I have extracted from the Travis Morien webpage http://www.travismorien.com/FAQ/main.htm

"A rather common piece of advice given is that anyone investing in the stock markets should consider a five year investment term for very good returns. In fact, it is argued, a five year investment time frame is a good cure for almost all risk in share investing, such a medium term time frame is all you need in order to make good on any bad purchase decisions, such as buying at the peak of a bull market and then suffering the effects of a crash. Five years is a nice number for investment advisors to use as it is considered suitably long term for most people, yet doesn't involve tying up your money for decades. It provides a nice cozy assurance that your investment will always pay off, it is just a matter of a little time.

Looking at the return of the All Ordinaries Index from the period of March 1950 to December 1999 (taken from Sensible Share Investing by Austin Donnelly, pg. 34) it can be seen that a five year investment horizon is not actually any guarantee of success in the market (let alone a single stock, which can be infinitely more volatile).

Over one year periods the All Ords has returned between 80.3% and -45.4%. Extending the time frame to five years the best result was an impressive 367% gain, or 36.1% compound, however the worst result was 14.5% per annum falls (a drop of 54% in the value of a portfolio over the course of five years). The best result over ten years was 22.7% a year compounded, but the worst was a 3.4% PA loss, meaning that over ten years an investment would have returned a loss of 29.2%. This is depressing, because ten years is ultra ultra long term in the eyes of many people, to still be losing so much money is intolerable. Over 15 years it was still possible to be 0.9% PA behind (a 12.6% loss).

In the last 50 years there have been no 20 year time frames when an investment portfolio was in the red, and the best 20 year result was 13.1%PA. Over 30 years the long term returns of the market become more apparent, the very best return over 30 years was a 9.7% compounded gain. In this study 15 years was about the longest time to be still showing a loss, however if the study had gone back to the crash of 29 the results would have been even more disturbing. The Dow Jones Industrials took more than 25 years to bounce back from the great crash. Could another super-crash like 1929 still happen? In theory, yes it could, many say actually that this is inevitable due to the massive gains that have ignited the market in the last couple of decades, we are looking at capital gains not seen since... the 1920s.

Now that we have all of the doomsaying over and done with, note the return of the 30 year investment being "only" 9.7%. An interesting phenomenon in market pricing that has significant application in contrarian investment is known as the regression to the mean. In his book Against the Gods - the remarkable story of risk, Peter Bernstein shows that overall the vast majority of mutual funds have a very similar return. Comparing different five year periods where the market made overall similar returns it was shown that the best mutual fund strategies in one five year period were often the worst in another, and vice versa. Some funds had very good years while others had bad years, then they swapped, but very few funds ever consistently did better than the pack.

The same thing is noticed in individual stocks, a few shares really outperform the market but most tend to do just average. Some shares that put up a few years of great outperformance will stagnate or fall in the following years so that their overall long term return is merely average. This is why investment advisors have to put that little disclaimer on their publications about "past results being no guarantee of future success."

It has in fact been proven by extensive research that when the market has had a number of good years a downturn is inevitable, and when the market has been bearish for a while an upspring is due, all in direct opposition to the random walk theory that usually accompanies the efficient market hypothesis. The market is chaotic, in the same sense as the mathematical definition of non-linear systems in physics and mathematics. It isn't often statistically predictable, but it certainly isn't random. Some great indicators have been fashioned out of this advice, see the section on contrarian investment for more details.

So what was the point of this article? Merely to state that "long term" means decades, not just a few years. Investing in the markets for five years is no guarantee at all of success. In the portfolios section of this FAQ I've written an article entitled "Returns of Each Asset Class", I produced three long term charts showing the rolling returns for five, ten and twenty year periods of holding US stocks. "

My suggestion is that people who wish to invest in the stockmarket spend some time reading and learning, and

http://www.travismorien.com/FAQ/main.htm

is a very informative site to begin with.

As for Tryhard, your statement

"arguably the most knowledgeable people involved in the industry"

maybe a little over the top. However I am fully prepared to listen to your arguments as to why you think so!!

bye

[Steve Navra]

Hi All,

I am currently in the USA (returning Monday - I MISS HOME) . . . couldn't help noticing this post:

1) My goal in setting up the Navrainvest funds was to provide my clients a safe medium in which they could invest in the stock market, as a diversifying balance to their property investments.

2) I stated up front that my expectations were to achieve double digit returns, IRRESPECTIVE of what the market returned. The long term average of the index (As pointed out by Bill) has been less than 10%, so anything greater than this would over a time period suffice and is certainly better than the cash return.

3) Of particular importance is the fact that the Navrainvest funds, are INCOME funds . . . so each investor has to date received a 10%+ distribution, which is now locked away. (In other words, even if there is a market crash tomorrow, they having received their distribution, cannot lose this portion.)

4) The first year of operation was always going to be difficult:

The Navrainvest funds operate by methodology of 'Dollar Cost Trading' - where stocks are purchased at low points and profits are locked in by realising gains at higher prices. This realised gain accrues out of volume under management.

The point I make is this:
After one month there was approximately $1.0 million under management . . . increasing at about $1.5 million per month. Currently there is $21.5 million of clients ( And my own!) money under management. The realised gains can only be made against the funds under management as they exist, so please realise that the compounding effect DOES NOT occur, until such time that a certain volume of funds under management exists.

EXAMPLE:

Imagine a 30% (!!) return in the first month of operation:

$1,000.000 at 30% = $300,000 (This would seem fantastic) BUT:

When applied to total funds under management at the end would be $300,000 / $21,500,000 = 1.4%.

IN OTHER WORDS:
If the fund started at $20+ million at day one, then there would have been far greater volume to trade and thus far greater accruing realised gains.

A fund has to start at some point in time and then build up its funds under managment.

As at last nights close the S&P 200 index is at -0.86%
The fund has performed at 1.15% gross. (Outperformed at 2.01% for the month)

NOTE: this is too short a time period on which to base judgement . . . I use it merely to represent the point about realising profits from the volume of funds under management.

Summary:
I regard the (NET of fees)12.41% and 10% distribution in our FIRST year as very satisfactory, and certainly within the range of expectations I offered at inception.

Put in another way:
The best of the managed funds have achieved 11% average over the longer term (5 to 10 years) so if we continue to post double digit returns (net of fees) irrespective of market conditions, we will be right up there with the best. We certainly are enjoying a good start to this financial year - showing that one can accrue profits, even in a declining market.

Only time will tell, good luck with your investing.

Sincerely,

Steve

PS: Good article Bill.L - I agree historical returns can be superflous and that medium to long term projections are used as an excuse by most fund manages! Actual returns (Dollars in the bank) are what really count . . . and as long as I can produce absolute (Positive) net of fees returns for my clients we shall all be happy. :)

[Garry K]

Interesting thread.

It seems to me that the Navra fund is an absolute return fund, in that what you get is mostly dependant on the skill on the manager(s) and their "system".

It operates very differently to most (if not all) "managed funds" and the "ASX". So really, there is little point thinking you are going to get similar results.

GarryK

[Andrew]

12% not having outperformed the indexes is kind of irrelevant unless you have the requisite expertise to do better yourself.



I'd have to respectfully disagree here. The proverbial monkey throwing darts
at a stock listing will approximate the index. An actively managed fund run by experts in their field should be able to exceed the benchmark.

andy

[Bill.L]

Hi Andrew,

I have to disagree with your last statement

"An actively managed fund run by experts in their field should be able to exceed the benchmark."

In you added together the results of all the experts in all the funds, you would get a result that equaled the indexes minus commissions, transaction costs and taxes(if any).

I've never seen an advert for a fund that didn't expect to beat the index! Just imagine how little money you would get in if you actually promoted index-2% :eek: yet that is probably the average.

bye

[qaz]

The problem is they often dont. Often simply because they have more money to invest in a boom as everyone wants to get in on the money and hence they feel pressure to invest that money agressively and get good returns for their investors. Then comes the inenevitable bust, and the fund sells off all its growth stocks to "stop the rot". This means the fund is last to take advantage of the next upswing. Also when the market is poor, the managed fund usually has less money to invest. Its not the funds fault or the people running it that the majority of investors expect the fund to outperform on the way up yet not loose money in the event of a downturn, that just isnt realistic. Good investors buy low, sell high. Managed funds have no choice but to try and buy high (they only start getting good money once the boom is well underway) and sell higher, yet magically pull out just before the big crash.

Tell me if im overlooking anything important here. The main point though im trying to make is, most managed funs are victims of the mentality of their investers rather than their lack of skill of their analysts.

[Thommo]

It is far easier for a start-up fund to exceed the averages. Starting fresh with a small pool, the manager can be pro-active.

After a couple of good years the money pours in and it gets harder, inertia takes effect and the once profitable niches are no longer big enough for the fund. The percentages drop, sometimes dramatically, but "%gain for last five years" still looks impressive because of those early figures. Profit qouted on a weighted basis would be much more modest, and honest.

I think this is contrary to what Steve said, but I believe it to be true.

Thommo

[qaz]

I agree. I remember when Warren Buffet came out and said at a stockholders meeting that with all the new money his company now has through its investments, that its going to be harder to keep up the high returns. It's generally easier to get high returns on a $20,000 share portfolio than a $2,000,000 one. One other thing about managed funds, their not closed ended like stock market companies. Theres only so many shares a company has (hence law of scarcity), yet if a managed fund does well, the unit trustees just rub their hands together and create more units with the inflow in cash.

[Andrew]

Bill, that is exactly my point. All of these "experts" are running funds that
can't beat a monkey throwing darts.

andy

n.b. I'm no longer talking about Navra exclusively but managed funds in
general.

[Alan H]

........

Now that we have all of the doomsaying over and done with, note the return of the 30 year investment being "only" 9.7%. An interesting phenomenon in market pricing that has significant application in contrarian investment is known as the regression to the mean. In his book Against the Gods - the remarkable story of risk, Peter Bernstein shows that overall the vast majority of mutual funds have a very similar return. Comparing different five year periods where the market made overall similar returns it was shown that the best mutual fund strategies in one five year period were often the worst in another, and vice versa. Some funds had very good years while others had bad years, then they swapped, but very few funds ever consistently did better than the pack.

The same thing is noticed in individual stocks, a few shares really outperform the market but most tend to do just average. Some shares that put up a few years of great outperformance will stagnate or fall in the following years so that their overall long term return is merely average. This is why investment advisors have to put that little disclaimer on their publications about "past results being no guarantee of future success."

It has in fact been proven by extensive research that when the market has had a number of good years a downturn is inevitable, and when the market has been bearish for a while an upspring is due, all in direct opposition to the random walk theory that usually accompanies the efficient market hypothesis. The market is chaotic, in the same sense as the mathematical definition of non-linear systems in physics and mathematics. It isn't often statistically predictable, but it certainly isn't random. Some great indicators have been fashioned out of this advice, see the section on contrarian investment for more details.

.....

bye

Hi Bill. Some good points. I was just wondering if you could clarify a couple of points for me.

Let's not refer to individual stocks here as I'm sure we can all find an example or two to make any case we want.

I think in most actively managed portfolios of 10 or more stocks you will probably always get a couple of stocks that in the medium term far exceeds your expectations and a couple that fall below those expectations.

For the sake of argument, let's also assume the stocks that make up the portfolio are large, reputable companies with good fundamentals.

Are you saying that you believe these stocks individually, and the portfolio as a whole will 'regress to the mean' over the medium term?

If so, why would you feel uncomfortable with purchasing below this 'mean' and selling above? NB. Yes by all means include 'stop losses'.




:)

[qaz]

I agree. I remember when Warren Buffet came out and said at a stockholders meeting that with all the new money his company now has through its investments, that its going to be harder to keep up the high returns. It's generally easier to get high returns on a $20,000 share portfolio than a $2,000,000 one. One other thing about managed funds, their not closed ended like stock market companies. Theres only so many shares a company has (hence law of scarcity), yet if a managed fund does well, the unit trustees just rub their hands together and create more units with the inflow in cash.

Just to quote myself here. Why is it most "managed funds" are open ended unit trusts and not closed ended "listed investment companies"?. Do managers of managed funds (trustees of unit trusts) get proportionatly more for running the system this way?.

[Aceyducey]

Bill, that is exactly my point. All of these "experts" are running funds that
can't beat a monkey throwing darts.

andy

n.b. I'm no longer talking about Navra exclusively but managed funds in
general.I'm simply surprised that no entrepreneur has as yet created a managed fund whose system involves using monkeys to throw darts to pick the stocks. It could be immensely popular amongst punters.

Though it could be somewhat embarrassing should it outperform the other funds....or the monkey be seen about town with married movie stars on his/her arm.

It would make a good story - Monkey makes Forbes Top 400 Wealthiest People List.

Cheers,

Aceyducey

[Sim]

I like Navra's fund for the simple reason that it is a good, safe investment (bluest of the blue chip stocks in Australia) that can be expected to return much better than money in the bank.

It's a good balance to my other, more speculative ventures, and a good place to park underutilised funds.

What's more, it produces income - which is useful in my trust for offsetting IP holding losses. That being said, I'm currently re-investing that income into more units, but I have the choice of taking the cash when I need it in the future.

[Garry K]

Just to quote myself here. Why is it most "managed funds" are open ended unit trusts and not closed ended "listed investment companies"?. Do managers of managed funds (trustees of unit trusts) get proportionatly more for running the system this way?.

The fund managers take a percentage eg .5% of the total fund - so big is better.
Some funds do close to more new business, this is particularly the case with Small cap funds, where there is limited dollar universe.
Colonials big imputation fund, now nearly $3Billion, is struggling to match some of the smaller funds, as they can't move in and out of stocks easily ie if they hold 80 stocks, thats $37.5 Million in each. No small amount to move in the market without everyone else knowing.

GarryK

[qaz]

The fund managers take a percentage eg .5% of the total fund - so big is better.
Some funds do close to more new business, this is particularly the case with Small cap funds, where there is limited dollar universe.
Colonials big imputation fund, now nearly $3Billion, is struggling to match some of the smaller funds, as they can't move in and out of stocks easily ie if they hold 80 stocks, thats $37.5 Million in each. No small amount to move in the market without everyone else knowing.

GarryK
Would the investor be generally better off if the small cap managed fund came good (had a big return one year) was a company on the stock exchange rather than as a unit trust trust?.

[Garry K]

Would the investor be generally better off if the small cap managed fund came good (had a big return one year) was a company on the stock exchange rather than as a unit trust trust?.
The MER's on LIC's are lower than managed funds eg ARGO.20% and AFIC 0.16% (these are by far the 2 biggest and best known), but they are passive "index" funds.
To know for sure which gave the best absolute return you would have to be able to compare exact funds in each area - and I don't know of any...so cant help.

GarryK

[Easymonet]

I'm simply surprised that no entrepreneur has as yet created a managed fund whose system involves using monkeys to throw darts to pick the stocks. It could be immensely popular amongst punters.

Aceyducey

It's not as easy as you might think Acey. Training the monkeys to throw darts takes some time, and the particularly talented monkeys always want a bonus banana scheme which can add to administrative costs. However I might be able to source a consultant monkey for you under an outsourcing agreement.

[Mark Laszczuk]

It's not as easy as you might think Acey. Training the monkeys to throw darts takes some time, and the particularly talented monkeys always want a bonus banana scheme which can add to administrative costs. However I might be able to source a consultant monkey for you under an outsourcing agreement.

HAHAHHAHAHAHHAHAHAHHAHAHAHAHHAHA!
That was awesome Easymonet, thanks for the laughs on a Friday night after working a particularly trying week.

[Bill.L]

Hi Alan,

Alans quote...

"For the sake of argument, let's also assume the stocks that make up the portfolio are large, reputable companies with good fundamentals.

Are you saying that you believe these stocks individually, and the portfolio as a whole will 'regress to the mean' over the medium term?"

Yes, I believe that large reputable companies with good fundumentals will regress to the mean; that being different to what you might expect. They will eventually turn to smaller, less reputable companies with average(or worse) fundamentals.

You should constantly monitor your portfolio, chuck out the underperformers and keep the performers.

bye

[Alan H]

Hi Alan,

Alans quote...

"For the sake of argument, let's also assume the stocks that make up the portfolio are large, reputable companies with good fundamentals.

Are you saying that you believe these stocks individually, and the portfolio as a whole will 'regress to the mean' over the medium term?"

Yes, I believe that large reputable companies with good fundumentals will regress to the mean; that being different to what you might expect. They will eventually turn to smaller, less reputable companies with average(or worse) fundamentals.

You should constantly monitor your portfolio, chuck out the underperformers and keep the performers.

bye

Thanks Bill.

Get rid of crook stocks? No argument from me there. However wouldn't you agree that 'good' stocks share prices can fluctuate and create buying opportunities too?

I've had a long week, and you've obviously been doing this for longer than me so perhaps you can explain your approach to me in simple terms by way of a little playacting scenario.

Let's say yourself and Warren Buffett have decided to meet at the local cafe to have a steak and coke(his shout! :D ). Mr Buffett has heard you have a keen interest in the stockmarket and you're keen to talk to him about his approaches too.

Mr Buffett starts the conversation with a quote he has previously used.

Bill........."What do you do with a good share that falls in price? You buy more of them".

How do you go about explaining to Mr Buffett that he is wrong?



:)

[geoffw]

Training the monkeys to throw darts takes some time,A very pointed observation.

Very sharp.

[Bill.L]

Hi alan,

Good question. Answer would be along the lines of... If it's as good as you say then when it shows signs of rising in price, as you expect all good cheap stocks to do, then I will buy. It maybe at a much lower price than now or even at a higher price, but I'll wait for the evidence that the price is going up.

bye

P.S. Buffet buys businesses not shares and has done so for a long time. The information he gathers is much greater than just in the annual report. But I suppose if I had US$26B in cash sitting idle I could too :)

[Mark Laszczuk]

In my limited understanding, Buffett buys businesses with strong fundamentals who's share price has dropped well below value. He's been known to purchase stocks in said businesses that have continued to drop, believing that eventually those same stocks will eventually rise in value again.
In my opinion, it doesn't seem to be Buffett's concern that the price of share is rising or falling AT THE TIME HE PURCHASES IT rather that he is confident that the value of the shares he buys will eventually rise again. A good example of this is GEICO, which was teetering on the virge of bankruptcy when Buffett started to purchase shares in the business.

[Aceyducey]

Remember that Warren Buffett's strategy involves buying good businesses and then ensuring they have good management.

He also buys good management in not quite so good businesses.

At the end of the day it's the people who make the business.

The average punter on the stock market doesn't have a choice in the management of a company, therefore has a far more limited selection of stocks they should buy.

I'm tending towards buying managements myself these day....one of the nice things about small companies is that you can call the CEO & have a chat.

Cheers,

Aceyducey

[Steve Navra]

It is far easier for a start-up fund to exceed the averages. Starting fresh with a small pool, the manager can be pro-active.

After a couple of good years the money pours in and it gets harder, inertia takes effect and the once profitable niches are no longer big enough for the fund. The percentages drop, sometimes dramatically, but "%gain for last five years" still looks impressive because of those early figures. Profit qouted on a weighted basis would be much more modest, and honest.

I think this is contrary to what Steve said, but I believe it to be true.

Thommo

Hi Thommo,

Back from the USA:
Thought I would give some feedback on the fund and answer the above quote.

FUND PERFORMANCE as at 9th August:

+2.60% above the market.

S&P 200 = -0.67%
Navrainvest = +1.93

EXCESS = +2.60% a good start to this financial year.

Generally what Thommo states above is true; however the nature of "dollar cost trading" is opposite (contrarian) to this:

The larger the pool of funds, the better the locked in realised gains will be. The greater the volume . . . the greater the buying depth and hence the selling range of trades will be.

The problem that most envisage is what happens if you can't get sufficient volume to trade? (IE you wish to buy / sell shares and there are no sellers / buyers)
ANSWER:
We buy as the shares price decreases, which means most others are selling and therefore there is always plenty to buy.
Likewise we sell as the share price increases and therefore there are always many buyers. (It is this demand that is inflating the prices)

Theoretically we would have to exceed half the market to start experiences trade volume difficulties!

I appreciate that many very large funds do experience trade volume difficulties . . . but then they are generally trying to sell when everyone else is selling and conversely trying to buy when everyone else is buying.

We do the opposite, therefore no problems with volume.

Regards,

Steve

PS: We have quoted profit on a weighted basis, which is why the first year returns look so modest!

[capitalist]

Has anyone else here received an email containing the annual report for the Navra Blue Chip Australian Share Retail Fund for the year ended 30 June 2004?

It is a large PDF attachment over 1 MB in size and my email provider won't let me download anything over this size. If anyone has also received it, could they please attach it to this thread so that myself and any others can download it?

Thanks in advance,

Mark

[geoffw]

I have it (810K) but that's a bit big to upload onto this site.

Could you ask them to load it onto their site? I couldn't find it there (www.navrainvest.com.au ) this morning.

[Steve Navra]

I have it (810K) but that's a bit big to upload onto this site.

Could you ask them to load it onto their site? I couldn't find it there (www.navrainvest.com.au ) this morning.

Hi Everyone,

The annual report will be placed on the website sometime today.

Fund returns for this first quarter as at last nights close 22nd Sept:

Gross Return: 6.13%
S&P 200 Index: 3.05%

Outperformance: 3.08%
Performance Fee: 1.11%

Net Return: 5.02%
Distribution for the quarter 3%+ so far. (Will be calculated end Sept)

Regards,

Steve

[geoffw]

Thanks Steve- I was hoping you were watching :D

[Homer J Simpson]

What happens to the monies invested through the fund if the management arm of the company goes bust? By that I don't mean shares in the company. :confused:

[Steve Navra]

What happens to the monies invested through the fund if the management arm of the company goes bust? By that I don't mean shares in the company. :confused:

Monies invested have full protection in the full sense of the Managed Funds Act . . . (ASIC)

So if Navrainvest went bust . . . this will not effect the funds under management.

The company would be wound up and the funds are returned to each investor.

Full details please refer to the PDS: www.navrainvest.com.au

Regards,

Steve

PS: On a happier and more positive note as at close today (24/09/04)
we are +3.33% ahead of the Index for the quarter! :D

[bawley]

Hi Steve

Thanks for update above - the fund performance on website for 22/9 is 4.93% - I am confused...........

regards
Bawley

[FelicityShagwel]

If you are to invest directly through Navrainvest, what is the entry fee and who would be getting the traling commission?

[bawley]

I am of course refering to yesterday's post. I see you have just slipped in some more good news while I was typing my post.

[Steve Navra]

Hi Steve

Thanks for update above - the fund performance on website for 22/9 is 4.93% - I am confused...........

regards
Bawley

Hi Bawley,

I will use the figures for 23/9 as these are the current ones reflected on the website:

S&P/ASX 200 Price Index 2.90%
(Index performance)

Gross Fund Performance 6.13%
(This is the actual fund return, before the performance fee is deducted)

Fund Out Performance 3.23%
(Fund Performance 6.13% - S&P 200 performance 2.90% = 3.23%)

Performance Fee 1.16%
(0.35875 of the out-performance 3.23% =1.16% )

Net Return 4.97%
(Gross return 6.13% - performance fee 1.16% = 4.97%)

Hope that explains it :)



Hi Felicity,

There is no entry fee into the fund!
If you invest through a broker they can charge you a fee of up to 4% . . . depending on the amount of work they have done in advising you.

Trailing commission is payed to the broker by the company out of the performance fee . . . it is NOT deducted from the investors funds.

Regards,

Steve

[FelicityShagwel]

"If you invest through a broker they can charge you a fee of up to 4%"..I think you have misunderstood my question. I want to know if you are to download a PDS from the navrainvest website and without the use of a broker or a financial planner, and invest directly into the fund, what is the entry fee? Subsequently, who will receive that "Trailing commission is payed to the broker by the company out of the performance fee " when you're investing directly into the fund without any 'advice'.

[Andrew_A]

"If you invest through a broker they can charge you a fee of up to 4%"..I think you have misunderstood my question. I want to know if you are to download a PDS from the navrainvest website and without the use of a broker or a financial planner, and invest directly into the fund, what is the entry fee? Subsequently, who will receive that "Trailing commission is payed to the broker by the company out of the performance fee " when you're investing directly into the fund without any 'advice'.
Felicity,

I think you have not understood Steve's reply. There is NO entry fee to the fund. No fee meaning you pay no fee.

If a broker/advisor refers an investor to the fund then they receive their cut out of the "performance fee". That means nothing to you as you don't receive ANY of the performance fee regardless of what happens to the fund. This would just mean the fund has to share some of their profit with the person who referred you (if any) and doesn't impact your bank balance. So to repeat: This money doesn't come out of your pocket.

http://www.navrainvest.com.au/index.asp?content=fee

One interesting condition of the Navra funds is that they don't take any "performance fee" if they don't outperform the ASX200 index.

WaySolid

[aidan_opan]

I think what FelicityShagwel's question is regarding "sophisticated investor's".

check this thread
http://www.somersoft.com/forums/showthread.php?t=6438&page=2&pp=15&highlight=navrainvest ..post 26&27.
I quote the question from the attached thread
Also, is there a 100% fee rebate option for sophisiticated investors who know they want to invest in your share fund and don't need any advice (because they know exactly where their portfolios stand ) ie - I want to invest in the Navra share fund and here is my cheque (no effort required my any NavraInvest advisor).
an answer came back
(2) The fee is negotiable but there will be no 100% rebate
From personal memory there was a special deal for all investors til 30 june 2003, where there was no entry fee.
Maybe Steve can clarify all this confusion about this.

[FelicityShagwel]

Sorry for the confusion to everyone, I am refering to the application fee and not the entry fee. I thought they are the same thing.
What is the application fee that is charged by Navrainvest as a "sophisticated investor". Meaning no advice "I want to invest in the Navra share fund and here is my cheque (no effort required by any NavraInvest advisor). "or any advisor. So back to my original question. If you are to invest directly through Navrainvest, what is the application fee and who would be getting the trailing commission?

Looking at the PDS for the wholesale fund, there is no application fee at all??

[Jamie]

Hi Felicity,

There is no application fee .

If you invest directly into the fund, and hence not through a broker, there is no trailing commission.

Jamie.

[Fat_Bastard]

Jamie,

Do you work at Navrainvest :confused:
Let's just wait for Steve's answer. Aidan has pointed out from past post that there is an application fee.

[Andrew_A]

Jamie,

Do you work at Navrainvest :confused:
Let's just wait for Steve's answer. Aidan has pointed out from past post that there is an application fee.
Is it just characters from Austin Powers that don't get this?

There are no entry/application fees. No meaning No.

The confusion appears to be arising from the conflict between the Navra funds and being a client of Navra financial services. The point being if you are an exisiting client of Navra financial then they might want to claim back some fees from the fund's outperformance and for referring you.

Steve can you confirm how the relationship between the fund and your financial clients works?

Felicity, you qualify as a "sophisticated investor" anyway and nobody will be getting kickbacks from your money.

Hope this helps.

WaySolid

[Steve Navra]

Hi All,

Where does all this talk of fees come from? :confused:


There is NO APPLICATION fee.
There is no ENTRY fee.
There is NO EXIT fee.

Where a trailing commission is paid to an introducing agent, it is paid by Navrainvest and not by the investor, and NOT out of the investors’ funds.

Felicity,
If you download a PDS and submit your application directly to Navrainvest, there are NO FEES.

What happens when you apply through a broker / Financial Planner?

The introducing agent can charge you a fee of up to 4% for the services he/she has rendered to you. (In the form of Financial Advice, planning etc)
We as fund managers have no control over the relationship between you and your Financial Planner / Broker.
Some Planners rebate this fee back to their clients . . . some don’t.
Some planners work on a fee for service basis and some planners work on a commission basis.
Please ask your planner/broker for a FULL DISCLOSURE of what fees they might charge you.

All details are specified in the PDS:
see www.navrainvest.com.au/index.asp?content=PDS

My business philosophy remains that we do not deserve to earn 1c unless we add value for our clients and hence the only fee earned by Navrainvest is the performance fee. . . and the performance fee is only earned if we outperform the index.

Sincerely,
Steve

[bawley]

[QUOTE=Steve Navra]Hi Bawley,

I will use the figures for 23/9 as these are the current ones reflected on the website:


(Gross return 6.13% - performance fee 1.16% = 4.97%)

Hope that explains it :)


Thanks Steve.............got it :o

[Steve Navra]

Hi All,

Navrainvest 1st Quarter Returns (01/07 to 30/09)


S&P/ASX 200 Price Index 3.73%
(Index performance)

Gross Fund Performance 7.20% :D
(This is the actual fund return, before the performance fee is deducted)

Fund Out Performance 3.47%
(Fund Performance 7.20% - S&P 200 performance 3.73% = 3.47%)

Performance Fee 1.24%
(0.35875 of the out-performance 3.47% =1.24% )

Net Return 5.96%
(Gross return 7.20% - performance fee 1.24% = 5.96%)

Quarterly distribution 3%


Regards,

Steve

[dee]

steve
Maybe a dumb question but can you explain why the quarterly distribution is 3%
when the Net Return =5.96%
what happens to that other 2.96%


thanks

[bawley]

Yes Steve, ditto above.

When is the balance paid out?? I have a vested (or invested) interest :D

regards
Bawley

[Steve Navra]

Maybe a dumb question but can you explain why the quarterly distribution is 3%
when the Net Return =5.96%
what happens to that other 2.96%

Hi Dee,

Good question :)

The distribution of 3% is made up of 'realised' profit.
The balance of 2.96% is 'un-realised' , meaning it is value in shares that have not been sold.

EXAMPLE:

You buy 1000 shares at $1.00 and it goes up to $1.05

So the capital value has increased by 5%.

Now if you sold 600 shares you would realise a proft of $30, which is 3% on your original cost.
This would be a realised profit of 3%

You would still have 400 shares at $1.05 = $4.20, which represents an extra $20 of value also on the original cost.
This would be an un-realised gaind of 2%.

Un-realised gains are contained in the value of the portfolio and are reflected in the unit price.

Regards,
Steve

[Fat_Bastard]

how is the performance fee refunded if the out performance for the year goes to zero by the next quarter

[Steve Navra]

how is the performance fee refunded if the out performance for the year goes to zero by the next quarter

Hi Fat_*******,

Easy . . . the reverse of how we receive it!
(Credited back to the fund and will thus reflect in the unit price.)

Adjustments are done monthly on this basis. There are very strict rules as regards the unit price so as to always ensure that every individual unit holder is treated equally.

Hmmmm . . . a lot better than other managed funds who bank and keep the fees even when they lose your money. :p

Regards,

Steve

[Steve Navra]

29-Oct-04

Fund performance as at End October: (4 Months)



Gross performance: 11.21%

ASX200: 6.95%

Outperformance: 4.26%

Performance Fee: 1.527%

Net fund return: 9.68% :D

Regards,

Steve

[Glebe]

You're doing well Steve.

Is your fund going to be available via any margin lending facilities?

[Steve Navra]

Is your fund going to be available via any margin lending facilities?

Hi Glebe,

Margin lending is already available through BT, Colonial and others. This has proven to be a popular choice, especially with the distribution performing in excess of 10% p.a.

A word of caution: Please have your situation 'risk profiled' before jumping into margin lending!

Regards,

Steve

[perky29]

Over 4% gross in the last month. Gotta be happy with that return. :)

[FelicityShagwel]

Isn't the interest rate lower and less riskier to use a line of credit to invest into shares? ie no margin calls.

[Sim]

You're quite correct there Felicity, but you're missing one key point.

With a LOC, you are using your own equity to invest in the shares. If you don't have the equity, you can't make the investment.

With a margin loan, they are lending you money against the value of the shares you are buying ... so you can actually buy shares with money you don't have.

Admitedly, it's not purely "money for nothing"... if your margin loan allows you to invest at a LVR of 50%, then you will need to put in $1 of your own money for every $1 that they will lend you to invest in the shares ... but it still allows you to buy more shares than you would if you used equity on its own.

[Glebe]

Steve,

Went to BT Margin Lending, didn't see your fund on their list nor is code NAV0001AU in their database:

https://online.btfunds.com.au/retailinvestor/investor?Request=MLSecuritySearch

Same thing at Infochoice Margin Lending lookup facility:

http://www.infochoice.com.au/investment/marginlending/compare/lvrlookup.asp

But did see it at Colonial

http://www.colonialmarginlending.com.au/rates_securities/MFLVRList.pdf

Not sure if you want to follow that up with BT though...

[GreatPig]

Isn't the interest rate lower and less riskier to use a line of credit to invest into shares?
The interest rate is lower, but I don't know about less risky. If you use a LOC to buy shares then you're effectively 100% geared.

GP

[FelicityShagwel]

The interest rate is lower, but I don't know about less risky. If you use a LOC to buy shares then you're effectively 100% geared.
I get your point. But at the same time with a LOC to buy shares, if your shares drop by 10% you don't have to meet a margin call.

[Glebe]

Felicity,

I can't do LOC coz I'm out of the property game entirely for the next 18 months.

[FelicityShagwel]

I can't do LOC coz I'm out of the property game entirely for the next 18 months.
Glebe,
I am not questioning your strategy, but rather reaffirming my own.

[Glebe]

Groovy, baby.

[Lissy]

Over 4% gross in the last month. Gotta be happy with that return. :)

Hi perky
Well, I guess that depends on your point of reference. My SMSF grew by 3% last month, and I'm hardly a professional!
I don't mean that as a criticism of Navra, I think they're great for people who don't want to do the share thing themselves. But looking at their result in isolation isn't very illuminating.

[Steve Navra]

Well, I guess that depends on your point of reference.

Hi Lissy,

Actually you are correct:

To be noted though is that the index itself increased by 3% for the month. My aim is to try and exceed the index by about 0.85% each month (After perf fee) and to achieve this consistently. So far each of these 4 months are at this level.

The most exciting thing from my point of view, is the 'locked in' gain; which is the realised profit that is passed on to the investors as a quarterly distribution. The first quarter was at 3.22% and the realised gain as at Friday is up to 2.7% for this current quarter.

The important point here is that if the market crashed at any point, this gain will not be lost!

Regards,

Steve

[GreatPig]

with a LOC to buy shares, if your shares drop by 10% you don't have to meet a margin call.
True, you get that benefit but with the downside of then having to continue paying interest on your losses.

GP

[qaz]

The important point here is that if the market crashed at any point, this gain will not be lost!


Can you explain that please?. If the market crashed tommorrow (say 30% wiped off the gross value of the market), the Navra fund wouldnt crash with it?

[Jacque]

29-Oct-04

Fund performance as at End October: (4 Months)



Gross performance: 11.21%

ASX200: 6.95%

Outperformance: 4.26%

Performance Fee: 1.527%

Net fund return: 9.68% :D

Regards,

Steve

Nice work, Steve :)
I like it a lot!

[Andrew_A]

Can you explain that please?. If the market crashed tommorrow (say 30% wiped off the gross value of the market), the Navra fund wouldnt crash with it?
That wasn't claimed. If the market was to crash then you are not going to lose the cash sitting in your pocket which you have been given from the quarterly distributions from the fund.

[Lissy]

Steve!
Well done!
As I said, knowing what the overall market has done is important when looking at returns.
4% sounded brilliant, which it is, but it equates to an "actual" gain of 1% over the market. So the Navra Fund has still outperformed the market, as you aim to do, and I certainly wouldn't be complaining if I belonged to the fund. But at least now we have a realistic figure for the gain.
It's nice to know my SMSF equalled the market and all I did was let it sit there for the month!
Maybe I should get more proactive on it....
But then again, maybe I should go find another property deal and leave well enough alone!!!

[Steve Navra]

30-Nov-04

Fund performance as at End November: (5 Months)



Gross performance: 15.53%

ASX200: 11.61%

Outperformance: 3.92%

Performance Fee: 1.41%

Net fund return: 14.12% :D

Regards,

Steve

[Andrew_A]

Steve,

With those sort of returns there is a possibility people will be selling their IP's to put money in the fund, rather than the other way round!

WaySolid

[Steve Navra]

With those sort of returns there is a possibility people will be selling their IP's to put money in the fund, rather than the other way round!

DON"T SELL :eek:

Draw down lazy equity and put that to work in the fund.

:D :D :D

[Alan H]

30-Nov-04

Fund performance as at End November: (5 Months)



Gross performance: 15.53%

ASX200: 11.61%

Outperformance: 3.92%

Performance Fee: 1.41%

Net fund return: 14.12% :D

Regards,

Steve

Steve,

I don't remember the details, but when you quote Gross Performance, in addition to realised and unrealised trading profits, does that also include interest on cash held and dividends received?

If it does, what sort of 'ball park' figure would be contributed by dividends? I would assume since many parcels wouldn't be held that long dividends wouldn't play a very big part.

Congratulations too. Good results.





:)

[Steve Navra]

. . .does that also include interest on cash held and dividends received?
Yes




If it does, what sort of 'ball park' figure would be contributed by dividends? I would assume since many parcels wouldn't be held that long dividends wouldn't play a very big part.
Ball park figure . . . about 2%
We trade the top and bottom quartile of each parcel.
At times like now, when the market is at a high we are currently about 40% in cash, but on average about 75% to 80% of each parcel is held.

Regards,
Steve

[Alan H]

Thanks Steve.

By the way, I hope whoever does your marketing gets a good pat on the back(assuming they don't drink :D ). November looks like it was a pretty spectacular Month for flow into the Fund(>$5mil).



:)

[COOPS]

As investors in the retail fund, we are extremely happy with the fund performance and have to agree with Alan - the influx of $$$$ is very impressive. Keep it up Steve.

[bawley]

Love the way the fund keeps rocking along - in an upwards direction. :)
Becoming addictive checking the site every 5 minutes for an update.

[Andrew_A]

Just a quick question.

What is the long term goal for the fund in terms of total funds under management and what consideration has been given to issues concerning capacity relating to the chosen trading style?

[Steve Navra]

Just a quick question.

What is the long term goal for the fund in terms of total funds under management and what consideration has been given to issues concerning capacity relating to the chosen trading style?

Hi Waysolid,

Long term goal is 1 billion under management.

Capacity or ability to be able to trade such volume DOES NOT represent a problem for the trading style; simply because DOLLAR COST TRADING is a contrarian approach.

We buy when the rest of the market is selling. (Lock in profits)
and sell when the rest of the market is buying. (Lower average buy price)
This way we do not experience trade volume difficulty as the size of the fund increases.

Regards,

Steve

[qaz]

Unless theres a flood of money and a sustained bull run in the market (no opportunities to buy up). Right Steve?.

[Glebe]

I asked Navrainvest some questions relevant to my situation, I'll post the answers here for peoples education:

a) If I apply via Colonial Margin Loan, do I pay an advisor fee?
An adviser fee is at the discretion of the advisor and any agreement you may have between each other. Your adviser may charge you up to 4.4% entry fee for the retail fund. No fee is applicable for the Wholesale fund. Colonial does not act an adviser and they do not charge take a fee of up 4.4%.


b) If I invest $20 000 now, and $300 000 in February next year, can I be transferred to your wholesale product without creating a sell/buy event?
When you transfer from the Retail to the Wholesale fund, it will create a sell/buy event depending on the unit price at the time. You may incur Capital Gains Tax.



c) If I apply to you directly, then apply for a Colonial Margin Loan, does this create a sell/buy event (and loss of money due to buy/sell spread)?

In this situation, an off-market standard transfer will take place and you may incur stamp duty of $0.60/Dollar transferred.

[Steve Navra]

stamp duty of $0.60/Dollar transferred.

60c per dollar
:eek: :eek: :eek: :eek: :eek: :eek: :eek: :eek:

0.06% :D

Regards,

Steve

[Steve Navra]

Unless theres a flood of money and a sustained bull run in the market (no opportunities to buy up).

Well,

There has been a flood of money and a sustained bull run just of late . . . and we are still moving ahead of the market :D

regards,

Steve

[Kenny]

Hi Steve,

Does the Fund have to fufill certain criteria before showing up on any of the published ratings lists of managed funds in the papers?

Also, which category will it be classed as?

Regards,

Kenny

[Steve Navra]

Hi Steve,

Does the Fund have to fufill certain criteria before showing up on any of the published ratings lists of managed funds in the papers?

Also, which category will it be classed as?

Regards,

Kenny

Hi Kenny,

The fund results are published in Morningstar and have received a researched 'investment grade' which allows the fund to enter various platforms.

To date we are in the upper quartile performance of funds in the catagory.

We have preferred to keep a low profile at this stage for a few reasons:
Cost of research and effectiveness of these opinions . . . between $20k and $25k per researcher. To me this is an exorbitant waste of money, especially when at least 3 years performance is required before the major wholesalers will invest their funds. My preference at this time is to produce an actual performance record over these first few years. (Results speak louder than opinions!)

Catagory: Australian Shares.

Regards,

Steve

[Kenny]

Hi Steve,

Thanks for the prompt reply.

I didn't realise the costs just to be considered. Hopefully, by three years performance is up, you will have reached $1 billion in FUM and can call your own shots.

All the best,

Kenny

[Garry K]

Hi Kenny,

The fund results are published in Morningstar and have received a researched 'investment grade' which allows the fund to enter various platforms.

To date we are in the upper quartile performance of funds in the catagory.

We have preferred to keep a low profile at this stage for a few reasons:
Cost of research and effectiveness of these opinions . . . between $20k and $25k per researcher. To me this is an exorbitant waste of money, especially when at least 3 years performance is required before the major wholesalers will invest their funds. My preference at this time is to produce an actual performance record over these first few years. (Results speak louder than opinions!)

Catagory: Australian Shares.

Regards,

Steve

Hi Steve

Well said.
These Rating houses have created their own industry.
They have their own measures so usually come up with different results.

GarryK

[Steve Navra]

31-Dec-04

Fund performance as at End December: (6 Months)



Gross performance: 19.07%

ASX200: 14.65%

Outperformance: 4.41%

Performance Fee: 1.58%

Net fund return: 17.49% :D


HAPPY NEW YEAR,

Steve

PS: Distribution for past quarter: 3.5%

[Pete]

Thank you, Steve, for posting the 2004 results. Congratulations to you and your team.

It must be enormously satisfying for you to have created a successful fund; realised a dream.

I wonder how you're going with regards to overall funds held compared to your budget, if you're reaching your expected results, how much day to day time you personally input, how you celebrate your success. Rhetorically, really, I don't need an answer.

Wishing you continued success, especially for 2005.

Best wishes,

[handyandy]

Congratulations Steve.

This is an excellent, overall result .

As both a shareholder and a fund investor I am doubly impressed and would also like to congratulate you and your team on this excellent result.

I am sure that 2005 is going to be an even better year with the fund exceeding all your expected targets. Maybe even being No 1 fund is Aust :D. It certainly is for me.

Cheers

[sydneycider]

Keep up the great effort Steve.

Fantastic results and looking forward to see what you can do in the next 6 months. Ceratinly a rewarding place to park our funds while waiting for the next property purchase.

Thanks,
Sydneycider

[AdamN]

31-Dec-04

Fund performance as at End December: (6 Months)



Gross performance: 19.07%

ASX200: 14.65%

Outperformance: 4.41%

Performance Fee: 1.58%

Net fund return: 17.49% :D


HAPPY NEW YEAR,

Steve

PS: Distribution for past quarter: 3.5%

Hi Steve (or anyone else that can assist)

If the net fund return is 17.49% for Q1 & Q2 combined
and the quarterly distributions are 3% (Q1) + 3.5% (Q2) = 6.5% for Q1 & Q2 combined
then when is the balance of 11% paid out to unit holders ? when they exit the fund ?

Just been reading through the funds info site :
http://www.navrainvest.com.au/index.asp?content=our_fund
For the retail fund, a performance fee of roughly 40% (0.3946) is charged on the Fund's annual return above the S&P/ASX 200 Price Index. How was that value arrived at ? I know that the fund has no entry, exit or MER fees, but for any gain the NI fund has over the comparative Index, nearly half of those profits are wiped from the unit holders in performance fees. Seems a little excessive to me, but I'm open to explanations (or feedback from those in the fund who have been happy with the performance) :)

Also, I understand that the NI fund implements the dollar cost averaging technique (bulk buying in the "trough" periods), which is fine in an upward market where there will be peaks and troughs generally rallying upwards, as we have seen over the last few months on the ASX. But what happens in a downward market ? How are profits achieved with dollar cost averaging when the market is trending down for months on end ? Or does NI implement strategies other than dollar cost averaging during downward times (i.e put options ?) to outperform the index ?

Thanks,
Adam.

[dee]

great results so far - but how good?
is there an external independant link anywhere where i can compare the fund to the ASX - from a certain date eg 1st July to current -
and assuming all dividends are reinvested - i believe there is an index for this?

another question
someone mentioned that at around the 45million mark - there will be a flood of money into the fund, as institutional investors may start investing - is this true
what effect will this have on current investors - will it dilute the profits

[House_Keeper]

Just caught with this interesting thread.

From what I can gather, the Navra fund relies on a trading strategy. Isn't it what people call hedge funds?

The performance in a bull market is quite remarkable. Well done. :)

I like the idea of not charging a fee unless you outperform the market.

I look forward to find out more about it at the upcoming course.

Cheers,

[House_Keeper]

It is far easier for a start-up fund to exceed the averages. Starting fresh with a small pool, the manager can be pro-active.

After a couple of good years the money pours in and it gets harder, inertia takes effect and the once profitable niches are no longer big enough for the fund. The percentages drop, sometimes dramatically, but "%gain for last five years" still looks impressive because of those early figures. Profit qouted on a weighted basis would be much more modest, and honest.


I have noticed this as well.

However, some large funds still do well. The colonial geared share fund being a recent example.

Cheers,

[likewow]

I have noticed this as well.

However, some large funds still do well. The colonial geared share fund being a recent example.

Cheers,

Usually the larger a fund gets the more it resembles the index and gets harder to outperform as the return resembles the index as well. Also the really large ones have problems getting in and out of positsions without affecting the market. So they only invest in the largest of large caps with high volumes and high liquidity to ease the entry and exits without becoming a 'market maker'.

The result from investing in the large caps is mediocre performance in the short-medium term. But they just become too big to invest in anything smaller in meaningful positions without affecting the market.

Also a lot of large funds will hold large cash reserves as an attempt to mitigate the above problems, again which contributes to average returns.

I always look for absolute returns rather than relative returns (which most funds use) as relative returns are usually not far above the index which is not hard to achieve.

I achieve great absolute returns by investing myself, its not for everyone but the returns are better.

[Andrew_A]

Originally Posted by WaySolid
Just a quick question.

What is the long term goal for the fund in terms of total funds under management and what consideration has been given to issues concerning capacity relating to the chosen trading style?

Hi Waysolid,

Long term goal is 1 billion under management.

Capacity or ability to be able to trade such volume DOES NOT represent a problem for the trading style; simply because DOLLAR COST TRADING is a contrarian approach.

We buy when the rest of the market is selling. (Lock in profits)
and sell when the rest of the market is buying. (Lower average buy price)
This way we do not experience trade volume difficulty as the size of the fund increases.

Regards,

Steve

[Ebbie]

I have a general question about the Navra fund. The following post http://www.somersoft.com/forums/showpost.php?p=142275&postcount=217 has me thinking about the effect of rising interest rates on the performance of the Navra fund. If rates hit 10% or higher and the fund historically returns 10% p.a then I suppose you may question the funds ability to provide the income you require (ie- purpose of investing in the fund is cash flow). Not knowing much about DCT is it possible the distributions from the fund will increase in keeping ahead of interest rate rises or would I more likely be faced with the option of having to sell up and exit the fund?

[TryHard]

Hi Ebbie

Its a fairly new fund, so I dunno if the average 10% return would be relevant. ie. this year its returned 21 % YTD and it did 12 % last year, and I think Steve posted somewhere the same system netted him 15% ish in previous years. (http://www.navrainvest.com.au/index.asp?content=fund_perf)

I am by no means knowledgeable on the real drivers (I just graduated to shoelaces from slip-ons) but I do understand the fund can perfom well in a rising or declining market because of the way it trades in the volatility of the share. Presumably interest rate hikes would cause more volatility and maybe more opportunities, but I guess with 10% or higher interest rates some would weigh up the risk.

Presumably there would also be some bargain IP's out there as the rates go towards 10-12 % and a lot of people might take advantage of the liquidity of the fund to go and buy some of the give aways ??

:D

[Sim]

If interest rates are at 10% or higher, you need to consider your gearing levels very carefully. If you are 100% geared (from your LOCs and/or Margin loans) with strongly rising interest rates, and an investment that is only returning 10% - you'd be crazy to stay in that position (in fact I'd hope you would have rebalanced well before then).

But at the same time, very high interest rates generally means high inflation, which I would guess could mean interesting times for the economy and on the stock market in general - high volitility ? The fund could do really well in that situation I imagine. A lot of assumptions there though - just a thought rather than a prediction.

[Ebbie]

- you'd be crazy to stay in that position (in fact I'd hope you would have rebalanced well before then).

I guess that's what I'm trying to determine. In a rising interest rate environment how soon and at what point (if any) would it be best to exit the fund? This would be more important in the retirement phase where an investor may have dropped back to a BALANCED risk profile. In Steve's example there is no suggestion of selling out of the share fund especially when this constant share income is used to cover the week to week portfolio expenses (as opposed to CG for LOE).

[Sim]

There's no easy answer to that Ebbie ... it all depends on your own personal circumstances - and on the performance of the fund at the time.

In general, you manage this risk by not gearing so heavily. You won't lose money if you don't have expenses (such as interest) to worry about.

I know the Navra funds aim to provide regular income at a fairly consistent level (as described on their website), so it would be up to you to manage your leverage risks based on the current performance levels of the fund. There are no guarantees!

Someone correct me if they can see another cost involved, but from what I can see, there is a 1:1 correlation between fund return and interest cost coverage. If your average interest rates on borrowing (assuming 100% leverage) is less than the net distribution return from the fund, then you will still make money (ignoring fluctuations in the net asset value of the fund and concentrating on distributions only).

This means that if the fund is returning 15% nett and interest rates are 14.9%, then you are still making money. Obviously if those numbers are reversed you start to lose money. This is why 100% gearing is risky, there are not insignificant costs you need to cover - and you need to take steps to manage this risk.

For example, if interest rates = 10% and the fund is returning nett ditributions of 10%, then if you are 100% geared, then you don't make (or lose) any money. If you are 90% geared, then you nett 10% of the distribution, 80% geared, you get 20% etc etc.

You can do the same calculations based on different fund returns versus interest rates too - just to work out your buffer zone.

In general, while it is definitely something that needs to be monitored, I don't think (or rather, I hope) that this will not become an issue. I expect (hope) the fund will return distributions of between 12% and 15% nett each year, which gives us a rather large buffer before we need to start worrying about interest rates. Heck, if interest rates hit 15% (from the current average of around 7 - 7.5% ... so basically doubled), then my whole strategy needs to be radically changed anyway - so we'll address that if it ever becomes necessary to do so - and if the fund is still returning more than 15% nett distributions, then there's no real cause for concern is there ?

To specifically answer your question about when to "sell out of the share fund" - depending on the circumstances, my initial approach would be to drop my gearing level (if necessary, sell units to reduce debt levels) - and not to sell out of the fund altogether. The assumption is that by carefully managing your investment in the fund, you have build up equity there that can act as a buffer, and if need be, can be sold down to reduce debt levels. It's all about flexibility - manage your debt levels, keep good buffers, and always have a risk management strategy in place.

[Ebbie]

Hi Sim, you are right in that I would expect to have accumulated a rather large buffer in the fund before I'd need to start worrying about interest rates. As you pointed out there would have to be some radical changes first before that happens.

Cheers, Ebbie.