Mohnish Pabrai

[Gregmal]

I don’t think it’s necessarily the fault of the manager if early returns skew the numbers. Having been in the biz a bit, frankly it’s not the managers fault that investors didn’t want to invest in the beginning and then chose to later on….however, you can clearly judge one’s long term track record and individual body of work, which is really where I have the issue with Pabrai. 

[Munger_Disciple]

5 hours ago, Vish_ram said:

Mutual fund Industry doesn’t use MWR but makes sense in PE and others.

 

Even with TWR, a major factor influencing one’s personal return is timing of entry and addition.

 

you can invest only in S&P and massively underperform/outperform it. 

 

I know that the mutual fund industry doesn't use MWR but I think they should show both TWR & MWR. A prospective investor should care about the MWR even more so than TWR because it shows how the fund does when it scales up. To illustrate the usefulness of MWR, let us consider the following (extreme) example:

 

Fund starts with $1mm and doubles in the first year to $2mm. Because of the 100% return in its first year, $1 billion additional capital pours into it at the beginning of 2nd year, and the fund goes on to lose 40% in the second year. It's clear that the fund lost a cumulative $399.8 mm for all investors over the two years. But its TWR (annualized) is still a very respectable 9.54%. However the MWR of almost -40% captures how bad the fund really was. From your calculations, it appears that Pabrai Funds is a good example of this discrepancy between TWR & MWR. 

Edited February 7 by Munger_Disciple

[Vish_ram]

In your example above, why should the advisor be punished when additional capital pours in at the wrong time?

That is the bad timing of new clients. 

You cannot expect the advisor to close funds at peak of the market. 

Edited February 7 by Vish_ram

[Munger_Disciple]

11 minutes ago, Vish_ram said:

In your example above, why should the advisor be punished when additional capital pours in at the wrong time?

That is the bad timing of new clients. 

You cannot expect the advisor to close funds at peak of the market. 

 

Fund manager should not accept funds if he thinks returns are likely to be poor IMO especially with higher asset base. Some funds indeed do close to new investors. In any case, this is how I evaluate funds. In my example, nobody thinks that fund manager did a great job, and it's the clients' fault. Your analysis of Pabrai Funds effectively shows the same thing. Results with tiny amount of capital were great, then Pabrai seemed to have attracted a lot of money at the top & subsequent results were poorer. 

Edited February 7 by Munger_Disciple

[Vish_ram]

In PIF2 case, it is not the "assets are overvalued so close for new clients" scenario. It is the advisor who just lost it thing. It is hard for anyone to accept that they lost it. 

 

The way the returns are shown, one can continue the charade for decades. That is my main point. 1 in a million can discern that. 

 

[Munger_Disciple]

39 minutes ago, Vish_ram said:

In PIF2 case, it is not the "assets are overvalued so close for new clients" scenario. It is the advisor who just lost it thing. It is hard for anyone to accept that they lost it. 

 

The way the returns are shown, one can continue the charade for decades. That is my main point. 1 in a million can discern that. 

 

 

Got it

[Gregmal]

Running a fund, especially one available to retail punters, is a business. The manager has no obligation to say no to new money and I don’t get what they’d get out of attempting to guess tops and bottoms on both the market and appropriate AUMs. At some level it’s the investors problem. 
 

The difference is Pabrai has shown poor judgment with investments for basically the last 20 years give or take a couple exceptions, and he is horribly misleading the way he promotes himself. These are two totally different issues. 

Edited February 7 by Gregmal

[Red Lion]

Most of these issues could be avoided by raising closed end funds more like a PE fund than a hedge fund. 

[winjitsu]

Purely out of completeness of data, here's Fund 4
 

 

[Vish_ram]

 

If all these folks headed to Bogleheads group, they would've been richer by 100s of millions. 

[Luke]

I have learned a lot from pabrai, i also think he grew a lot as an investor and while coal has gone back from the parabolic moves last year, if those bets turn out well i think investors who held on to him will be rewarded...i also understand the critics

[Pellom]

I won't call him a charlatan, but riding Buffett and Munger's coattails while charging people 1.5%+ just proves he doesn't get it.

 

He does great philanthropic work in India, however, so I think there's some deserved reputational gain. 

 

Charlie liked talking to him and kept him in his orbit. He never gave him a dime. That's telling. 

Edited Tuesday at 03:17 PM by Pellom