Guest Posted January 30, 2013 Share Posted January 30, 2013 I think Fairholme will simply close the funds. Nothing else. A closed-end fund sufficiently serves the purpose of turning the holdings into permanent capital. But people can still pull out. All it means is that there will likely be more outflows than inflows, correct? a closed end fund trades like a stock. the capital is essentially permanent. They'll trade above, at and below nav. Link to comment Share on other sites More sharing options...
nkp007 Posted January 30, 2013 Share Posted January 30, 2013 I think Fairholme will simply close the funds. Nothing else. A closed-end fund sufficiently serves the purpose of turning the holdings into permanent capital. But people can still pull out. All it means is that there will likely be more outflows than inflows, correct? a closed end fund trades like a stock. the capital is essentially permanent. They'll trade above, at and below nav. I don't think this is what is happening. I think he is closing his funds to new investors. That is different from turning it into a closed end fund. Link to comment Share on other sites More sharing options...
valuecfa Posted January 30, 2013 Share Posted January 30, 2013 I think Fairholme will simply close the funds. Nothing else. A closed-end fund sufficiently serves the purpose of turning the holdings into permanent capital. But people can still pull out. All it means is that there will likely be more outflows than inflows, correct? a closed end fund trades like a stock. the capital is essentially permanent. They'll trade above, at and below nav. I don't think this is what is happening. I think he is closing his funds to new investors. That is different from turning it into a closed end fund. Right. There is a difference. But i think that is the route that eventually will be taken. Speculation of course Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 30, 2013 Share Posted January 30, 2013 I think Fairholme will simply close the funds. Nothing else. A closed-end fund sufficiently serves the purpose of turning the holdings into permanent capital. But people can still pull out. All it means is that there will likely be more outflows than inflows, correct? a closed end fund trades like a stock. the capital is essentially permanent. They'll trade above, at and below nav. I don't think this is what is happening. I think he is closing his funds to new investors. That is different from turning it into a closed end fund. I suspect it is lots of hot money coming in. Many articles on small/retail investors being back in the market. I'm sure he doesn't want the surge in cash after what happened last time. http://professional.wsj.com/article/SB10001424127887323644904578272300823643528.html?mod=WSJPRO_hpp_LEFTTopStories Individual Investors Help Drive Stock Surge Link to comment Share on other sites More sharing options...
bargainman Posted January 30, 2013 Share Posted January 30, 2013 might be his first step in his transition to permanent capital! Yes, I think this is what is happening. He learned a very tough lesson with the amount of redemptions he had to deal with. I think he may have been at the point where "how do even my long-term investors lose faith in me? Time to reduce that risk." Cheers! As a shareholder who was with him for the whole ride down as his assets ballooned up, all I have to say is it's about time! He shouldn't have had to learn the tough lesson, he should have closed it the first time to prevent the fiasco.. 20/20 I guess... Sorry, if that's harsh, but I was not impressed with his allowing it the balloon up the first time... Link to comment Share on other sites More sharing options...
bargainman Posted January 30, 2013 Share Posted January 30, 2013 In the video, he also says that he had a standard mutual fund but people want to pay him more. I really hope he's not gonna leave the little guy behind and manage hedge funds (around 29:25). :( At this point, I don't think the hedge fund route would provide him any more comfort than running the mutual fund. A 2-year lockup would not have made a whole lot of difference to him, but it probably would have saved some fools from selling out before the rebound. I suspect he is going the permanent capital route, and it very well may be through St. Joe. Cheers! Oh goodness, that would be awful if he turned his back on the mf.... I really hope he doesn't even if people do want to pay him more... But the way he said that did seem worrisome... Link to comment Share on other sites More sharing options...
Parsad Posted January 30, 2013 Share Posted January 30, 2013 In the video, he also says that he had a standard mutual fund but people want to pay him more. I really hope he's not gonna leave the little guy behind and manage hedge funds (around 29:25). :( At this point, I don't think the hedge fund route would provide him any more comfort than running the mutual fund. A 2-year lockup would not have made a whole lot of difference to him, but it probably would have saved some fools from selling out before the rebound. I suspect he is going the permanent capital route, and it very well may be through St. Joe. Cheers! Oh goodness, that would be awful if he turned his back on the mf.... I really hope he doesn't even if people do want to pay him more... But the way he said that did seem worrisome... I don't think it's about being paid more...but the fact that he's susceptible to his investors pulling their money completely out every time the world faces a crisis. We aren't even out of this one yet, and there is every possibility it could get worse...I don't think he wants to put himself at risk again...both within the fund and mentally. Berkowitz has enough money where his entire family, including his children and grandchildren will never have to work. It's not about money. Cheers! Link to comment Share on other sites More sharing options...
cubsfan Posted January 30, 2013 Share Posted January 30, 2013 Last June, at the Morningstar conference in Chicago, I spoke to Fred Frankel of Fairholme. I've owned FAIRX and FAAFX for a number of years. We spoke about the tough 2011 at length. He told me they were disappointed in all the "fast" money that came flying into the fund in 2010, and then flying out in 2011. Being named Morningstar Fund Manager of the Decade attracted hot money, which created the eventual liquidation in 2011. I told him the simple solution was just to close the fund. Why hadn't they done that? He said they would consider that seriously after what happened in 2011. The rapid liquidations took them by surprise and indicated that "new" shareholders didn't quite understand the fund. Link to comment Share on other sites More sharing options...
PLynchJr Posted January 30, 2013 Share Posted January 30, 2013 Why is he closing the allocation and income funds? They are tiny...268M and 241M respectively. Do you think he'll roll them all into the original Fairholme Fund (FAIRX)? If he doesn't any idea if you are a shareholder in say FAIRX could you swap that position with FAAFX in a year if you wanted? Or would you have to be a shareholder in each Fairholme fund before the cutoff date? Also are there any issues to owning closed funds that accepts new investments from current shareholders at a broker like Fidelity? Link to comment Share on other sites More sharing options...
JRH Posted January 30, 2013 Share Posted January 30, 2013 Why is he closing the allocation and income funds? They are tiny...268M and 241M respectively. Do you think he'll roll them all into the original Fairholme Fund (FAIRX)? If he doesn't any idea if you are a shareholder in say FAIRX could you swap that position with FAAFX in a year if you wanted? Or would you have to be a shareholder in each Fairholme fund before the cutoff date? Also are there any issues to owning closed funds that accepts new investments from current shareholders at a broker like Fidelity? I actually emailed investor relations last night asking these very questions and will post the answers when I hear back. My suspicion is that unless you have a "direct" account with Fairholme, you will not be able to switch between funds as a way to get around being "closed to new investors". That's based on similar, prior experiences that indicate to me that the brokers simply don't have the information systems/logic set up to tell cross-fund or cross-account whether someone qualifies to put money into a "closed" fund, but we'll see. Link to comment Share on other sites More sharing options...
BargainValueHunter Posted January 30, 2013 Share Posted January 30, 2013 It seems that the one, constant obsession BB has had over the years is CASH. Having that nice cash buffer between liquidation and opportunity is something that he must hold in highest regard. So 2011 must have been a total punch in the gut especially in Q4 when the bargains were becoming obscene as the money was going bye bye. I, too, am shocked he didn't do this sooner. By the way and off topic Research in Motion just changed the name of the company to Blackberry. Link to comment Share on other sites More sharing options...
JRH Posted January 30, 2013 Share Posted January 30, 2013 So 2011 must have been a total punch in the gut especially in Q4 when the bargains were becoming obscene as the money was going bye bye. It was enough of a punch that he went fully invested in the 2nd half of the year (in at least one interview, he said he was down to <=5% cash). I remember late in 2009 he said that he didn't think the fund had even a single month of outflows during the downturn. The difference between having the full faith and support of his client base in 2008 and being essentially abandoned in 2011 would have to be a striking difference, especially occurring just two years apart. If anything, I think closing the funds to new investors is a very controlled reaction to that experience. Link to comment Share on other sites More sharing options...
JRH Posted January 30, 2013 Share Posted January 30, 2013 If he doesn't any idea if you are a shareholder in say FAIRX could you swap that position with FAAFX in a year if you wanted? Or would you have to be a shareholder in each Fairholme fund before the cutoff date? Press release clarifies the SEC filing - "closing to new investors" is on a per-fund basis. If you have money in one, you can only contribute additional money to that one. http://www.fairholmefunds.com/sites/default/files/January%202013%20Fairholme%20Funds%20Press%20Release.pdf Link to comment Share on other sites More sharing options...
Guest wellmont Posted January 30, 2013 Share Posted January 30, 2013 got a counter-intuitive theory. I think he did this to get more money into the fund NOW. why? so he can buy more AIG before it gets away from him. Link to comment Share on other sites More sharing options...
ourkid8 Posted January 31, 2013 Share Posted January 31, 2013 It would make sense to implement what Francis did across his funds. There is a 2% redemption fee for individuals who redeem their units in less than 2 years. None of that amount goes to the fund manager but to the long term shareholders in the fund. Thanks, S Last June, at the Morningstar conference in Chicago, I spoke to Fred Frankel of Fairholme. I've owned FAIRX and FAAFX for a number of years. We spoke about the tough 2011 at length. He told me they were disappointed in all the "fast" money that came flying into the fund in 2010, and then flying out in 2011. Being named Morningstar Fund Manager of the Decade attracted hot money, which created the eventual liquidation in 2011. I told him the simple solution was just to close the fund. Why hadn't they done that? He said they would consider that seriously after what happened in 2011. The rapid liquidations took them by surprise and indicated that "new" shareholders didn't quite understand the fund. Link to comment Share on other sites More sharing options...
Liberty Posted January 31, 2013 Share Posted January 31, 2013 It would make sense to implement what Francis did across his funds. There is a 2% remption fee for individuals who redeem their units in less than 2 years. None of that amount goes to the fund manager but to the long term shareholders in he fund. Thanks, S Didn't know about that, very clever! Thanks for sharing. Link to comment Share on other sites More sharing options...
txlaw Posted February 1, 2013 Author Share Posted February 1, 2013 Reports for 2012 are up: http://www.fairholmefunds.com/reports Link to comment Share on other sites More sharing options...
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