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Shane
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Hello,

  I am a new investor currently in graduate school unrelated to business, and am trying to learn the fundamentals of investing so that I may try my hand at managing my own money in the future.  Right now I control maybe 20% of my investments and over time would like to feel comfortable enough to increase this amount.

  Until then I'm interested to hear of some money managers whom you all would trust your own money with?  I'm particularly interested in global or international funds as the majority of my personal stock picks are domestic companies.  However if you highly recommend any domestic managers I'd love to hear about them as well.  I am a U.S. resident, please don't exclude any b/c of minimum investment.

  Also - I have a question regarding some funds I already follow... many of you seem very experienced and I'd like to hear what you think of these topics.

 

Wintergreen Fund - I really like reading Mr. Winters letters and I agree with a lot of his basic idea's... However he charges a 1.95% expense ratio which I find high, is his skill worth that price over 10-15 years?

Chou America - Very new here, but as I've read very successful and the guy appears to be really moral and fair in the way he runs his fund.  He seems to manage quite a few funds now - 4-5 in canada and now 2 in the US.  Do you all think he is spreading himself too thin?  Can a manager actually manage that many accounts with success, does he have other analysts at his firm?  Whats your opinion of his expense ratio?

 

Thanks in advance,

Shane Smith

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Hello,

 I am a new investor currently in graduate school unrelated to business, and am trying to learn the fundamentals of investing so that I may try my hand at managing my own money in the future.  Right now I control maybe 20% of my investments and over time would like to feel comfortable enough to increase this amount.

 Until then I'm interested to hear of some money managers whom you all would trust your own money with?  I'm particularly interested in global or international funds as the majority of my personal stock picks are domestic companies.  However if you highly recommend any domestic managers I'd love to hear about them as well.  I am a U.S. resident, please don't exclude any b/c of minimum investment.

 Also - I have a question regarding some funds I already follow... many of you seem very experienced and I'd like to hear what you think of these topics.

 

Wintergreen Fund - I really like reading Mr. Winters letters and I agree with a lot of his basic idea's... However he charges a 1.95% expense ratio which I find high, is his skill worth that price over 10-15 years?

Chou America - Very new here, but as I've read very successful and the guy appears to be really moral and fair in the way he runs his fund.  He seems to manage quite a few funds now - 4-5 in canada and now 2 in the US.  Do you all think he is spreading himself too thin?  Can a manager actually manage that many accounts with success, does he have other analysts at his firm?  Whats your opinion of his expense ratio?

 

Thanks in advance,

Shane Smith

 

 

Excelent choices!  However, the sad truth is that even the best managed funds as they get larger, find it difficult to outperform the market consistently by a significant margin after fees because of many institutional constraints and the unfortunate tendency of "investors" to chase returns and dump even well managed funds that underperform for a brief period.  

 

Thus, almost all fund managers are much more concerned about falling behind the herd than investing wisely for the long haul.  Those who resist groupthink are, perversely, frequently punished with withdrawals and resultant forced sales when the market takes a turn away from value.  

 

There are a few excellent, smaller funds with loyal investors that are managed well, some by people who post on this board, that may be less exposed to these forces, but these may have minimum amounts for accepting funds for investments.    

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There are not a lot of managers that I'd trust my money with.  But, if you don't have a keen interest in active management of your assets, and you are worried about the potential agency costs/risks associated with a fund manager there's a guy by the name of Bogle who's a pretty sharp cat and probably won't do worse than the broad market indices....as they say, "set it and forget it."

 

SJ

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There are not a lot of managers that I'd trust my money with.  But, if you don't have a keen interest in active management of your assets, and you are worried about the potential agency costs/risks associated with a fund manager there's a guy by the name of Bogle who's a pretty sharp cat and probably won't do worse than the broad market indices....as they say, "set it and forget it."

 

SJ

 

StubbleJumper - I am actually very interested in active management.  I have really had a change of heart and no longer really plan on using my degrees.  I know several local retired hedge fund managers and have been learning from them about basic investment ideas.  I plan on getting an MBA or CFA and trying to land a job with associates of theirs...  Are you referring to John Bogle?  Does Bogle have a website that you know of?

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There are not a lot of managers that I'd trust my money with.  But, if you don't have a keen interest in active management of your assets, and you are worried about the potential agency costs/risks associated with a fund manager there's a guy by the name of Bogle who's a pretty sharp cat and probably won't do worse than the broad market indices....as they say, "set it and forget it."

 

SJ

 

StubbleJumper - I am actually very interested in active management.  I have really had a change of heart and no longer really plan on using my degrees.  I know several local retired hedge fund managers and have been learning from them about basic investment ideas.  I plan on getting an MBA or CFA and trying to land a job with associates of theirs...  Are you referring to John Bogle?  Does Bogle have a website that you know of?

 

 

Yep, I was mischievously referring to Jack Bogle and Vanguard Funds. 

 

Vanguard has a good selection of index funds that have low management expense ratios.  With index products, you never need to worry about the integrity of your investment manager, or the tenure of your investment manager (if Klarman leaves Baupost, is it still the same value prospect for an investor), or the style of investments selected.  If you don't have the time or stomach to worry about whether Southeast, Baupost, or Chou are sticking to their value-guns or whether the brain-trust will stick it out, then Vanguard is a no-brainer. 

 

You probably will not do meaningfully worse than the broad-based indices, which is more than most actively managed funds can promise!  If you don't have time, set it and forget it!

 

SJ

 

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I'm really just fishing for knowledge about some smaller, less well known funds which I can analyze and hopefully invest with for the very long term (15+ years maybe).  Any insight is appreciate - I'm eager to learn!

 

StubbleJumper - Yes!  I know that common wisdom is to index and "set it and forget it."  I've read David Swensen's 'Unconventional Success' and I really enjoyed it.  I am currently maxing out my ROTH every year and soon will model it with quarterly rebalancing after his vanguard suggestions.  I spend an inordinate amount of time researching stocks and investors, and I just can't bring myself to not try to invest some money with active management and see if I make the correct choice 10-15 years from now!

 

Really this has become interesting to me because I have private fund with an investment manager at a very large firm and I am beginning to doubt if he spend any time on my account at all.  So i'm looking for some funds which I have more faith in!

 

 

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If you are going to learn the trade and understand value investing, I would start by investing in stocks yourself.  I would also invest with a few folks that post here (like Sanjeev and James - sorry if I missed other with funds but these are the only two I know that run funds) both have published records that beat most mutual funds.  The difficult part with mutual funds is the institutional constraints they have (diversification, benchmarking and firm size).  Even the best funds like Fairholme can only beat the market by 5% per year.  To do better than that you need to have concentration.  I would say that many folks here on the board have done better than most mutual funds (even the best ones) and it is not because we are smarter than the fund manager it is becuase our ponds are too small for them to fish in and make a difference and we can concentrate.

 

 

Packer 

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Guest valueInv

Hello,

 I am a new investor currently in graduate school unrelated to business, and am trying to learn the fundamentals of investing so that I may try my hand at managing my own money in the future.  Right now I control maybe 20% of my investments and over time would like to feel comfortable enough to increase this amount.

 Until then I'm interested to hear of some money managers whom you all would trust your own money with?  I'm particularly interested in global or international funds as the majority of my personal stock picks are domestic companies.  However if you highly recommend any domestic managers I'd love to hear about them as well.  I am a U.S. resident, please don't exclude any b/c of minimum investment.

 Also - I have a question regarding some funds I already follow... many of you seem very experienced and I'd like to hear what you think of these topics.

 

Wintergreen Fund - I really like reading Mr. Winters letters and I agree with a lot of his basic idea's... However he charges a 1.95% expense ratio which I find high, is his skill worth that price over 10-15 years?

Chou America - Very new here, but as I've read very successful and the guy appears to be really moral and fair in the way he runs his fund.  He seems to manage quite a few funds now - 4-5 in canada and now 2 in the US.  Do you all think he is spreading himself too thin?  Can a manager actually manage that many accounts with success, does he have other analysts at his firm?  Whats your opinion of his expense ratio?

 

Thanks in advance,

Shane Smith

 

 

Excelent choices!  However, the sad truth is that even the best managed funds as they get larger, find it difficult to outperform the market consistently by a significant margin after fees because of many institutional constraints and the unfortunate tendency of "investors" to chase returns and dump even well managed funds that underperform for a brief period.  

 

Thus, almost all fund managers are much more concerned about falling behind the herd than investing wisely for the long haul.  Those who resist groupthink are, perversely, frequently punished with withdrawals and resultant forced sales when the market takes a turn away from value.  

 

There are a few excellent, smaller funds with loyal investors that are managed well, some by people who post on this board, that may be less exposed to these forces, but these may have minimum amounts for accepting funds for investments.    

 

If you look at Morningstar, funds like Fairholme, Yacktman and Sequoia seem to beating by a fair margin. Others like Third Avenue, Longleaf and FPA Crescent  seem to be doing pretty well too. Am I missing something here?

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I know that FPA Crescent, Yacktman, and even Fairholm have grown in size considerably over the past few years. Not sure about the others.  It brings up concerns because the general trend is that larger funds have more difficulty beating the index than smaller funds.  So if these funds get good publicity and increase AUM by billions will they still perform like they did without the AUM?  That is I think what was being referred to.

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size is certainly a concern. Look at the fine folks at Dodge and Cox. Very low expenses, high ownership from the managers, very solid long term track record. The funds kept getting larger and larger, and over the past 5 year so so, performance has suffered. Now, that's not to say asset bloat is the sole reason, but I don't think it helped.

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I know that FPA Crescent, Yacktman, and even Fairholm have grown in size considerably over the past few years. Not sure about the others.  It brings up concerns because the general trend is that larger funds have more difficulty beating the index than smaller funds.  So if these funds get good publicity and increase AUM by billions will they still perform like they did without the AUM?  That is I think what was being referred to.

 

Take a look at TILDX, read up on Zeke's letters and his presentations at the VICs.  They have the added flexibility of selling calls.  Kinetics has had pretty good performance but seems to be less known.  Also the Primecap Odessey group is a bit less well known but they run some of Vanguard's funds.  Just food for thought.  Bruce from Fairholme is opening up a new fund too, it will be interesting to watch..

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twacowfca - Whom are the managers of these smaller funds?  I know I am young but I may have more to invest than you assume.  It might be possible for me to meet the minimum.

 

 

 

Can't say because I don't have intimate knowledge of all fee structures and long term results.  Also, I might omit someone who might deserve to be mentioned.  Sorry.

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Guest misterstockwell

For Asia exposure, Matthews Funds are top notch. I use MAPTX, MCHFX.

Distressed debt is done right by the Third Avenue folks, TFCIX

I will use Chou Funds once they are easily available.

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Grenville - Mind sharing why you feel that way?

 

Hi Shane.Smith,

 

You should look back at their holdings the last couple of years. I was unfortunately a shareholder when they had over 15% in WAMU which they rode down to nothing. The entire time, I didn't feel like Nygren came clean with the mistake. I can't remember what else he held, but he has lost my confidence forever.

 

The same goes with the Davis folks at New York Venture when they lost over a billion on AIG and then another huge slug on Merrill Lynch.

 

Mutual funds have one big issue which is liquidity when the markets drop. This can be a bigger problem for value mutual funds which need time to allow their ideas to work out. 2008-2009 showed that issue to me with Third Avenue who were net sellers when they wanted to be net buyers. The shareholders at the time pay the price for other's wanting their money back.

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Hey there is this guy named Ryan Morris of Meson Partners I saw his name on the notes of the Wesco meeting. Supposedly he will be a star fund manager in the future. The website is http://www.mesoncapital.com/

 

Another Fund family not many people talk about are the Tocqueville Funds http://www.tocquevillefunds.com/index.html

 

Also check out Royce funds http://www.roycefunds.com/#

 

Paul Sonkins Hummingbird value fund http://www.hummingbirdvalue.com/

 

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I'm hoping this will get noticed without posting another thread

 

I'm researching funds as we speak, and I'd like to hear where alpha ranks to you when analyzing a fund?  Some funds seem to produce consistent (high 15 year return) without much alpha.  Do you feel Alpha really is a decent guage of measuring skill in long only portfolio's?

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Some Seth Klarman wisdom on the usefulness of alpha and beta:

 

As value investors, our business is to buy bargains that financial market theory says do not exist. We’ve delivered great returns to our clients for a quarter century—a dollar invested at inception in our largest fund is now worth over 94 dollars, a 20% NET compound return. We have achieved this not by incurring high risk as financial theory would suggest, but by deliberately avoiding or hedging the risks that we identified. In other words, there is a large gap between standard financial theory and real world practice. Modern financial theory tells you to calculate the beta of a stock to determine its riskiness. In my entire professional career, now twenty-five years long, I have never calculated a beta. This theory urges you to move your portfolio of holdings closer to the efficient frontier. I have never done so, nor would I know how.  I have never calculated the alpha or beta of my firm’s investment performance, which is how some people would determine whether or not we have done a good job.

 

-O

 

I'm hoping this will get noticed without posting another thread

 

I'm researching funds as we speak, and I'd like to hear where alpha ranks to you when analyzing a fund?  Some funds seem to produce consistent (high 15 year return) without much alpha.  Do you feel Alpha really is a decent guage of measuring skill in long only portfolio's?

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