Navrainvest Fund Performance (Calender Year)

[Steve Navra]

Hi All,

I am pleased to submit fund returns for the previous calendar year.

Particularly pleasing is the comparison against Super Funds, as per the news report hereafter:

Navrainvest Fund Performance for the period
Start Date: 31/12/2003 End Date: 31/12/2004:

Fund: Retail
Performance: 23.78%

Fund: Wholesale
Performance: 24.04%



_______________________________________________________________________

Golden year for super funds delivers best returns in a decade
By Anne Lampe
January 28, 2005

http://www.smh.com.au/articles/2005/01/27/1106415732111.html

It's official. The 2004 calendar year produced the best superannuation fund returns in a decade on the back of a buoyant Australian sharemarket and strong listed property investments, super industry research house Intech Investment Consultants has found.
In the year to December 31, 2004, the median return of all funds was 15.5 per cent - almost double the 2003 result of 8.3 per cent and a median loss of 7 per cent in 2002. The returns are after fees and taxes but not entry or exit fees.
The highest returns were recorded by high-growth funds, which recorded an average return of 16.87 per cent - topped by Vanguard High Growth fund with an 18.96 per cent return. These funds have 75 to 100 per cent of their assets invested in shares.
Medium-growth super funds, which invest 60 to 75 per cent in shares, averaged a return of 15.4 per cent. Of those, the top five performers were INVESCO Growth fund with a return of 22.02 per cent, Perpetual Balanced Growth fund with 19.01, BT Active Balanced fund with 18.51, AMP Balanced Growth fund with 17.85 and IOOF/Perennial Balanced fund with 17.71.
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Balanced portfolio funds, with a 40 to 60 per cent exposure to shares, reported an average return for the year of 12.89 per cent. At the top were United Balanced fund with 16.62 per cent, ING Balanced fund with 14.95, Catholic Super fund with 14.36, ASGARD with 14.27, and Colonial First State with 13.75.
Even conservative portfolio funds with a sharemarket exposure of 20 to 40 per cent generated average returns of 9.82 per cent.
Intech head of research Hugh Dougherty described the glittering results as representing a "golden year" for super funds. But two years of volatility in fund returns served to highlight that fund members should not expect the 2004 result to be repeated this year.
"Indeed, following such a strong result sourced from returns generated from Australian assets, it is more important than ever for investors to maintain a well-diversified portfolio which also includes a strong commitment to international assets," Mr Dougherty said.

 

[MichaelW]

Steve,

Nice one! I think NavraInvest will form part of my portfolio when I eventually get around to going to your training session and then getting some of your guidance on structure. I'm a bit lazy to trade them myself...

Great result,
Michael.

 

[Aceyducey]

Steve,

Why aren't you mentioned in the article?

Cheers,

Aceyducey

 

[Steve Navra]

Why aren't you mentioned in the article?

We are not a super fund!

Yes we can accept superannuation funds (DIY) or through a platform.

Regards,

Steve

 

[likewow]

Steve,

Would you agree that its much easier for a small(er) boutique such as the Navra fund to outperform the huge super funds without trying too hard so its a bit of an unfair comparison.

As you know the bigger a fund is the more it resembles the index and so does its returns and therefore outperformance is difficult for the bigguns.

 

[Steve Navra]

Would you agree that its much easier for a small(er) boutique such as the Navra fund to outperform the huge super funds without trying too hard so its a bit of an unfair comparison.

As you know the bigger a fund is the more it resembles the index and so does its returns and therefore outperformance is difficult for the bigguns.

Hi likewow,

In the general sense what you say is true and the reason for this is the difficulty of placing trades (getting buys and sells) with huge volume acquisitions.

THIS DOES NOT APPLY to our funds as we trade on a contrarian basis . . . buying when the price goes down (Everyone else is selling) and selling as the price goes up. (Everyone else is buying.)

So, irrespective of size, we are / will not be limited by this factor.

The larger the Navrainvest FUM (Funds under management) becomes, the more efficiently we can trade!

Reasons:
1) Unit cost per trade decreases.
2) Greater market depth can be achieved.

All the above is possible as a result of DOLLAR COST TRADING. (NOT Dollar cost averageing)

Regards,

Steve

 

[likewow]

Lets say the Navra fund was a massive fund. If you were buying when the price was going down and because you are a massive fund your buys would be huge and therefore your large buys would stop the price going down. And the same for selling.

But the reason the big funds find it hard to get away from index type returns is because if they buy in 'meaningful quantities' for their fund they have to buy in high volume- high liquidity blue chips and usually blue chips have pretty average performance over shart-medium term. So a way around this is to buy lots of shares in smaller companies and in smaller quantities then above. The problem here is that they start to resemble the index or a sector if its a sector fund and again achieve average returns.

Will you go for absolute return rather than relative return in future?

 

[qaz]

I think he's after relative return for the most part. Getting a good absolute return in a poor market either requires superhero like investing skills or a very bareish view of the market which causes you to underperform when the market is going up. Or at least thats how I see it.

 

[Steve Navra]

But the reason the big funds find it hard to get away from index type returns is because if they buy in 'meaningful quantities' for their fund they have to buy in high volume- high liquidity blue chips and usually blue chips have pretty average performance over shart-medium term.

But . . . ???

Navrainvest ONLY buys "high volume- high liquidity blue chips" !!!

So why isn't our performance "pretty average performance over short-medium term" ??

Regards,

Steve

 

[Davidr]

Hi Steve,

Congrats on the fund's excellent performance!!

One thing I'd like to query though is that the article talks about high-growth, medium-growth, and balanced funds. I think I recall your fund being an income fund.

Is there a substantive difference, and if so should the comparison between other income funds?

Regards,
David.

 

[likewow]

So why isn't our performance "pretty average performance over short-medium term" ??

Regards,

Steve

Steve,

It is pretty average. Its only a bit over the index for the year, which is my whole point. Shouldnt a small boutique fund be returning results well above the index?

 

[likewow]

I think he's after relative return for the most part. Getting a good absolute return in a poor market either requires superhero like investing skills or a very bareish view of the market which causes you to underperform when the market is going up. Or at least thats how I see it.

Poor market??? Its been a bull market since March 2003 and calender 2004 has been HUGE!!!

 

[quiggles]

Don't think you read qaz right, likewow. His point was that if you were bearish you would underperform in a bull market, not that it is a bear market now.

 

[Steve Navra]

It is pretty average. Its only a bit over the index for the year, which is my whole point.

likewow,

You drive a tough bargain

I will happily take the "pretty average" and accept returns in excess of 20% for the year.

The real point is that it is easy to beat a mediocre index return . . . beating an unprecedented bull market is something else.

At the end of the day, consistency of return is what counts.
The fund is averaging about 18% pa since inception.
Which as per rule of 72 means a doubling of CG every 4 years.

Maybe not good enough for you??
But I'll take it every day of the week.

Regards,

Steve

 

[Steve Navra]

One thing I'd like to query though is that the article talks about high-growth, medium-growth, and balanced funds. I think I recall your fund being an income fund.

Hi David,

Two good questions:

"high-growth, medium-growth, and balanced funds" refers to (as mentioned in the news article) the percentage these funds invest in shares. In other words, they balance their portfolios between shares, cash and other classes of investment.

Navrainvest funds are balanced between shares and cash, so yes the make up of the portfolio might be slightly different to others. (On average we are about 75% to 80% in shares and 20% to 25% in cash . . . so most similar to the "high growth" as mentioned above.)

No two funds are exactly alike; so the objective measure might be: Given that the various fund managers have a choice of what the portfolio mix is . . . then the bottom line remains the absolute return their funds show.

Is there a substantive difference, and if so should the comparison between other income funds?

The percentage figures shown represent absolute returns. Income funds then distribute the return as an income rather than capitalising value each year.

To date we have distributed 6.79% (half year) and the unit price is at 1.13. (13% capital growth) Since 01/07/04

At the end of the financial year you might then compare the incomes distributed by the various income funds.

At this stage then one measures the absolute return of various funds to see how they are tracking. (Whether the growth is accrued or distributed as an income is not relevent to the absolute result)

Regards,

Steve

 

[likewow]

likewow,

You drive a tough bargain

I will happily take the "pretty average" and accept returns in excess of 20% for the year.

The real point is that it is easy to beat a mediocre index return . . . beating an unprecedented bull market is something else.

At the end of the day, consistency of return is what counts.
The fund is averaging about 18% pa since inception.
Which as per rule of 72 means a doubling of CG every 4 years.

Maybe not good enough for you??
But I'll take it every day of the week.

Regards,

Steve

Steve,

Yes i suppose i do drive a hard bargain and Im pretty tough on my own investing results. I have a close friend who is a financial advisor with P.I.S. and he showed me some of the returns from one the Skandia geared share funds. A couple have had returns of about 50-60% in the 2004 bull market!!

 

[Steve Navra]

Steve,

Yes i suppose i do drive a hard bargain and Im pretty tough on my own investing results. I have a close friend who is a financial advisor with P.I.S. and he showed me some of the returns from one the Skandia geared share funds. A couple have had returns of about 50-60% in the 2004 bull market!!

Hi likewow,

Nothing wrong in wanting excellence

Skandia geared at 50% to 60% is excellent.

NB: It is a geared fund though, which is much higher risk than the funds mentioned in this post.

Example:
The return on an ungeared fund could be multiplied 3 to 4 fold as a result of gearing, which in a Bull Market will obtain a brilliant result. This is not normal practice for super fund money, because of the associated risk of the reverse position.

To make a fair comparison between geared and ungeared returns you would need to compare them with a factor difference of at least 3 fold.

There is nothing wrong with gearing and my clients do have the opportunity to do so individually within the fund. Each investor will assess and decide their own risk profile.

Clients in Navrainvest who geared to 67% have received about 58% return as per above, after the deduction of the gearing expense.

BUT they do carry a greater risk . . . which is NOT for everyone

Thank you for your comments . . . they do take these discussions to a greater depth.

regards,

Steve

 

[GreatPig]

It is pretty average.

From an article in the latest edition of Daryl Guppy's newsletter:

SUPERANNUATION FUNDS – MISSING IN ACTION

There appears to be no shame in the superannuation funds management industry. If you are a member of one of the best performing funds you will shortly receive a glowing report telling you how they achieved a maximum of 17.1% return for 2004. This is attributable to management skill and further evidence that the average person cannot do any better than the professionals.

The truth is much different. A 17.1% return represents a 7.3% market UNDERPERFORMANCE for 2004. The market added 24.4% from the close of the first trading day in 2004 to the close at the last trading day in 2004. Investors who simply used an Exchange Traded Fund added 24.4% to their capital; - and received dividends from all the top 200 companies.

It says a lot about Australian investment illiteracy when funds can tells us that this 7.3% underperformance is really an outstanding result.

Cheers,
GP

 

[likewow]

From an article in the latest edition of Daryl Guppy's newsletter:



Cheers,
GP


SUPERANNUATION FUNDS – MISSING IN ACTION

There appears to be no shame in the superannuation funds management industry. If you are a member of one of the best performing funds you will shortly receive a glowing report telling you how they achieved a maximum of 17.1% return for 2004. This is attributable to management skill and further evidence that the average person cannot do any better than the professionals.

The truth is much different. A 17.1% return represents a 7.3% market UNDERPERFORMANCE for 2004. The market added 24.4% from the close of the first trading day in 2004 to the close at the last trading day in 2004. Investors who simply used an Exchange Traded Fund added 24.4% to their capital; - and received dividends from all the top 200 companies.

It says a lot about Australian investment illiteracy when funds can tells us that this 7.3% underperformance is really an outstanding result.

Great post GP and very true.

 

[AdamN]

Hi Steve,

Congrats on the results. Hope the trend continues.
I am looking at getting into the fund but I have a few questions (I actually posed these in another thread but didn't get a response as yet) :

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...ontent=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 trading 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 trading when the market is trending down for months on end ? Or does NI implement strategies other than dollar cost trading during downward times (i.e put options ?) to outperform the index ?

Thanks,
Adam