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Launch of Gotham Absolute Return Fund (Greenblatt)


dcollon
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Does anyone have insight into the workings of the fund? Are they a traditional, bottoms up equity fund, or is it a Magic Formula thing?

 

Not sure but reading the investment process on the website... it implies something formulaic with rankings of relative discounts, so my best guess is magic formulaish with some bottoms up insights mixed in from the analysts.

 

"The firm's proprietary research is the foundation to an investment process which allows Gotham to systematically analyze the absolute and relative valuation of stocks.

The Co-CIOs and their team of equity analysts employ Gotham's proprietary and analytical framework to re-rank stocks daily and adjust the rankings to incorporate changes in stock prices and new fundamental information.

The long portfolio is re-ranked on a daily basis and rebalanced to weight most heavily those stocks that are priced at the largest discount to our research team's assessment of value. In general, as a company appears cheaper its weight in the portfolio increases.

The short portfolio is ranked and rebalanced daily to weight short positions most heavily that sell at the largest premium to Gotham's measures of value."

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I wonder what the motivation to do this is? He already has the mutual funds, he's already wealthy, and he already has plenty if status in the investment community.

 

When I see this it reads the same as when an athlete joins dancing with the stars, or an old actor is suddenly wants a reunion show, they're out of money. I doubt Greenblatt is in the same situation, but I wonder why do this?  If he cares about investors then dump them on the fund with lower fees. If this is basically a hedge fund version of the magic formula then it will always underperform the mutual fund because if the extra 2% drag.

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Guest rimm_never_sleeps

look carefully. the management fee is 2%. the cost f the shorts brings it to over 3%. it's basically a long short hedge fund that is offered to the public (high net worth) like a traditional mutual fund.

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look carefully. the management fee is 2%. the cost f the shorts brings it to over 3%. it's basically a long short hedge fund that is offered to the public (high net worth) like a traditional mutual fund.

 

He can charge as much as he wants if people are willing to pay, but it looks a little awkward to me. First he presents himself as the guy that wants to make simple and effective investing available to the public, writing some very good books and opening the magic formula investing website. And then he starts a fund with a large mgmt fee. Then again, I don't know his reasons for doing this.

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Guest rimm_never_sleeps

look carefully. the management fee is 2%. the cost f the shorts brings it to over 3%. it's basically a long short hedge fund that is offered to the public (high net worth) like a traditional mutual fund.

 

He can charge as much as he wants if people are willing to pay, but it looks a little awkward to me. First he presents himself as the guy that wants to make simple and effective investing available to the public, writing some very good books and opening the magic formula investing website. And then he starts a fund with a large mgmt fee. Then again, I don't know his reasons for doing this.

 

There is a concept called the "money mind". I believe it was from John Train. It essentially means you know how to compound capital at high rates or you don't. Greenblatt is one of the very best investors on the planet. investing was so easy for him  he started to try to figure out new simpler ways to do it. To me this looks like JG is starting a hedge fund but not taking any of the profits, like every other hedge fund manger does, whether they have the "money mind" or don't.

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There is a concept called the "money mind". I believe it was from John Train. It essentially means you know how to compound capital at high rates or you don't. Greenblatt is one of the very best investors on the planet. investing was so easy for him  he started to try to figure out new simpler ways to do it. To me this looks like JG is starting a hedge fund but not taking any of the profits, like every other hedge fund manger does, whether they have the "money mind" or don't.

 

I think "money mind" came from Phil Carret.  Another value guy who lived a very long life and was still investing until he was around 100 I believe.

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Guest rimm_never_sleeps

There is a concept called the "money mind". I believe it was from John Train. It essentially means you know how to compound capital at high rates or you don't. Greenblatt is one of the very best investors on the planet. investing was so easy for him  he started to try to figure out new simpler ways to do it. To me this looks like JG is starting a hedge fund but not taking any of the profits, like every other hedge fund manger does, whether they have the "money mind" or don't.

 

I think "money mind" came from Phil Carret.  Another value guy who lived a very long life and was still investing until he was around 100 I believe.

 

you are correct sir. I stand corrected.

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I think JG explained it in some of the interviews he did to publicize his books.

 

1- His first book on special situations investing was too much work for most people.

2- His second book was on magic formula... it was STILL too much work for people because you had to trade 30 stocks/year.

3- So... he figured it would make sense to start a mutual fund to make it easier for people.

4- His firm started doing more research into quantitative investing, which Ben Graham would likely have been a fan of.  I'm guessing that JG has figured out some minor improvements to magic formula investing and has also figured out how to apply it internationally.

 

So as far as institutional investors go, he figured that magic formula on steroids would be appealing since it delivers almost as good returns as his special situations investing *but at much lower volatility*.

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