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Chou Funds 2010 annual report has been released!


ourkid8
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Sanj,

 

I really like Chou and I know you know a ton about him. Any idea why the Europe fund hasn't performed very well?

 

I like the fact that he did state this about the europe fund

 

"

MANAGEMENT FEE: Our record since inception has not been as stellar as we would have liked. As

a result, I will not be charging management fees for the next three years, starting from January 1,

2011 through December 31, 2013."

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I think it's primarily because Europe was actually in worse shape than the U.S., with less capacity to handle the eventual fallout.  While many people don't like the bailouts and other stimulus packages in the U.S., the government did what they needed to do quickly with little debate...they did not need to seek out state or municipal approval. 

 

In Europe, it has been more of a struggle to come to any consensus effort, and then on top of that, there is no real regulatory body that can just step in and provide unilateral oversight to all of the institutions and governments.  Thus, U.S. stocks rebounded quickly, whereas Europe is still mired in one bailout after another, with long-winded debate over what to do. 

 

Francis' fund is just stuck in there as well.  He'll do better than the index, but I think Europe's problems are still completely systemic.  This is going to be a very big problem I believe, but no one wants to hear the bad news...they just keep floating along like there will be no issues.  I have a hard time believing the Euro will survive long-term.  Cheers!   

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"MANAGEMENT FEE: Our record since inception has not been as stellar as we would have liked. As

a result, I will not be charging management fees for the next three years, starting from January 1,

2011 through December 31, 2013."

 

Anyone know of another fund company that waives fees on mature funds?

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"MANAGEMENT FEE: Our record since inception has not been as stellar as we would have liked. As

a result, I will not be charging management fees for the next three years, starting from January 1,

2011 through December 31, 2013."

 

Anyone know of another fund company that waives fees on mature funds?

 

Thanks for the input, Sanj. You're always insightful. :)

 

Norm, while Chou is great, Bridgeway has him beat. They have a fund with a negative expense ratio.

 

http://www.kiplinger.com/columns/value/archive/should-you-buy-Bridgeway-Aggressive-Investors-1.html

 

 

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Thinks stocks and bonds are near full valuation.  Concerned with China, but found opportunity in Japan.  Excellent discussion regarding investing in debt securities.  Always a good read!  Cheers!

 

I am a unit holder of Chou Asia and I would love to know what Japanese stocks he is interested in! Mr. Chou has 38% of net assets in cash and definitely itching to put it to work...

 

Shahed

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Anyone know of another fund company that waives fees on mature funds?

 

Generally, most investment funds that operate without any set annual management fee and operate solely on a hurdle and high watermark...such as the Pabrai Funds, etc.  Anyone who invested in the Pabrai Funds had Mohnish working for them for free over the last couple of years, since he had to regain the high watermark for his partners.  We did the same in our Canadian fund.  There are a number of other managers in the U.S. who operate the same way, and they too would not take any sort of fee.  Francis is one of the very few...you can count them on one hand...that have made any sort of adjustment to their set management fee.  Cheers!

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Anyone who invested in the Pabrai Funds had Mohnish working for them for free over the last couple of years, since he had to regain the high watermark for his partners.  We did the same in our Canadian fund.

 

what's also worth noting is that current partners who add new funds or new partners who join in this period get absolute free ride since they are not paying any performance fee even though their capital is earning over the high watermark. The high watermark is applied at the fund level and not an individual partner level. Most hedge funds look at each individual partner's high watermark to calculate the incentive fee.

 

My fund's administrator had charged incentive fee off of new partners in my fund even though the fund was below its high watermark but I reversed it because that's the right thing to do, IMHO. There are only a handful guys who do it so be careful of how high watermarks are applied.

 

Cheers!

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My fund's administrator had charged incentive fee off of new partners in my fund even though the fund was below its high watermark but I reversed it because that's the right thing to do, IMHO. There are only a handful guys who do it so be careful of how high watermarks are applied.

 

That's totally correct Pilaniman!  Especially during 2008 and 2009, a number of well-known value funds were doing that.  I think that's totally wrong.  Like Mohnish, we collected no fees whatsoever until all of our partners were made whole. 

 

So all income, including income generated from new capital that came into the fund in 2008 and 2009, was all reallocated to the partners.  None of it was paid out as incentive fees until all of our partners had reached their high watermark, plus their 6% annualized return.  It was only at that point that we started to get paid again.  I think all funds should operate like this!  Cheers!

 

 

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