Marlin

[SPC]

MFD I don't think you're 'fascinated by the psychology' whatsoever.
You just don't like it. You don't like fund managers. Many don't.
I don't like Lawyers myself but I still use them, despite their fees.
I'll throw you bone..stop thinking about managed funds and start thinking about shares. That's all these instruments are.
Shares go up and shares go down. We each chose when we buy and sell.
It's a market place.
Follow your own words and ignore the rest.

[justakiwi]

I am not really a believer that past success as a manager has any correlation to future success but we all make our own decision. Their ability to outperform their fees is the only reason you could do better here than in a cheaper index

I don't disagree with you, which is why I said I don't have "blind faith."

Your returns could have been even higher <…> reduced their fees.

Edited for clarification: I agree that their fees are too high and that my returns would be higher if their fees were lower. But at the moment their high fees are something I am prepared to tolerate, as long as my returns are acceptable. Which they are.

I am also interested to see what happens to the fund in a bear market given the need to spit out dividends at 8% of NAV. With a rising market this is accounted for, in a falling market it could fall hard.

You are correct. There are no guarantees. About anything. I guess my basic philosophy is:

Watch and monitor
Always remember that things can change
Have faith but never blind faith
Revisit my investing goals/plan and amend as necessary

I'm a beginner. I still have so much to learn. I never lose sight of that fact.

[alokdhir]

If u study the last two warrant conversions of MLN and KFL then u will notice conversion rates of 90% and 91% respectively ....which means almost 10% warrants expired in spite of almost 40% discount being offered at conversion price to current SP ...Guess who lost that money ...Passive investors who didn't convert or sell their warrants and their holdings value got diluted . Who gained ...active , informed and timers etc type investors .

Big question ...Do u invest in managed fund and pay high fees to let a manager do a good job ? Yes ...Do u want to continuously monitor or be hands on investor if u letting a Fund manager take a cut and do the job for u ...No

Why listed funds of Fisher funds bring out warrants issue..To help investors make more money ...No ...they do for increasing corpus so that it increases their payout as its fixed %age of corpus .

So if u dont want to be active investor or glued on investor then these are not for u ...U rather be in passive index fund or a mix of them for full diversification geographically as well sector wise ..all types are also Listed PIEs from Smartshres ...with NZG having just 0.2% fund charges and it exactly replicates NZX50 index ...mind u KFL has outperformed index by bigger margin only recently due to some excellent stock picks and weightages

As there is never any free lunch in this world ...so all funds too have pros and cons ...Fisher fund's listed funds do well especially KFL and recently MLN and BRM too but then one need to learn to play these capital raising warrants issues too otherwise one will loose out to other active holders

Having said that ...I am also fascinated by tremendous premiums for these funds ...even to extent of 30% to NAV ...being an investor in all and now only in KFL since 2010...this recent phenomena has thrown another challenge to long time holders ...to sell out and become passive investors in a index fund to take advantage of this 30% premium as it may not last ( to me its like paying $ 130 for $ 100 bank note ..putting it very simply ) or to keep holding and eventually see this premium gone or reduced considerably . Maybe long term holders of discount days to NAV ( like me ) have less to loose then recent participants who bought at hefty premiums ...but still loosing an opportunity to make extra returns will haunt old holders too ...Think about MEL / CEN holders who didn't sell out in Jan at huge surges due to ICNL buying indiscriminately .

I am still wondering what should be done here ...there are always new challenges for holders in these funds ...ie to decide whats the right thing to do at that moment . Me surely dont look for such challenges for holders when investing in an actively managed fund charging hefty fees and taking performance fees too . But then they are doing so well that not easy to let go also

[mfd]

MFD I don't think you're 'fascinated by the psychology' whatsoever.
You just don't like it. You don't like fund managers. Many don't.
I don't like Lawyers myself but I still use them, despite their fees.
I'll throw you bone..stop thinking about managed funds and start thinking about shares. That's all these instruments are.
Shares go up and shares go down. We each chose when we buy and sell.
It's a market place.
Follow your own words and ignore the rest.

I'm aware of what interests me but thanks for the psychoanalysis. I'm ok with fund managers, in fact thanks to my kiwisaver my largest position is in an index fund. I am skeptical of the ability for managers to consistently outperform, so I chose a nice cheap 0.3% fund and expect to do better than the fancy pricey funds over the long term, based on the extensive literature around this topic.

But yes, I am fascinated and always curious to hear peoples reasons for investing in these funds. I see it as similar to bonus bonds, accepting a lower expected return in exchange for a little more excitement. Or a little like the helicopter payments in the US recently - free money from the government which is really just taxpayers giving money to themselves. Interesting psychology.

The only reasons I've heard that make sense are a belief the management will outperform their high fees, or for retired people requiring simple cash flow options. Alokdhir has an interesting point regarding active investors making higher returns at the expense of the lazy, but that rather works against the 'simple cashflow option' for pensioners as they are likely to be the patsies.

[justakiwi]

I think you are missing the point. The Fisher trio are not performing like your traditional managed fund. They are, and have been for some years, performing very well, and beating the index. So definitely not a “lower expected return.”

As I have said, there are no guarantees this will continue, but in the meantime they are all excellent investments for overall capital and dividend return. For all the reasons you have mentioned, I would usually not invest in a managed fund, but these three are my “exception to the rule.” For now anyway.

But yes, I am fascinated and always curious to hear peoples reasons for investing in these funds. I see it as similar to bonus bonds, accepting a lower expected return in exchange for a little more excitement.

[SPC]

MFD none of these listed fisher instruments are 'funds' to me.
They are shares listed on the NZX.
It's as simple as that.
Normal share investment behavior applys.

[justakiwi]

I agree. They might be similar to managed funds in the sense that they actively manage their investments in companies, but we hold shares in KFL, MLN, BRM - not units in funds.

MFD none of these listed fisher instruments are 'funds' to me.
They are shares listed on the NZX.
It's as simple as that.
Normal share investment behavior applys.

[alokdhir]

I agree. They might be similar to managed funds in the sense that they actively manage their investments in companies, but we hold shares in KFL, MLN, BRM - not units in funds.

U hold shares in Investment companies which invest in listed companies as per portfolio disclosed ...so easy to see actual per share value of the company ...thats why they disclose weekly NAV and quarterly portfolio ratios . As these listed companies are closed end funds with only way to trade in them is on NZX so their SP gets determined both on demand and supply issues and intrinsic NAV ( Mainly ) ....If these were open ended funds then companies would be buying and selling them directly based only on NAV . Also if they had market maker feature like all Smartshare ETFs then also they would trade on NZX based mainly on NAV

Only reason they can deviate so much ( both ways ) from NAV is because of no market maker on NZX so demand and supply issues decide their SP in a big way

At present they are the most efficient tax side investment vehicle too as their only tax rate is 28% which is final thus making them 11% more tax efficient for highest rate payers

[justakiwi]

That’s basically what I was trying to say. You did a much better job

U hold shares in Investment companies which invest in listed companies as per portfolio disclosed ...so easy to see actual per share value of the company ...thats why they disclose weekly NAV and quarterly portfolio ratios . As these listed companies are closed end funds with only way to trade in them is on NZX so their SP gets determined both on demand and supply issues and intrinsic NAV ( Mainly ) ....If these were open ended funds then companies would be buying and selling them directly based only on NAV . Also if they had market maker feature like all Smartshare ETFs then also they would trade on NZX based mainly on NAV

Only reason they can deviate so much ( both ways ) from NAV is because of no market maker on NZX so demand and supply issues decide their SP in a big way

At present they are the most efficient tax side investment vehicle too as their only tax rate is 28% which is final thus making them 11% more tax efficient for highest rate payers

[winner69]

Things like MLN like normal stocks can actually be assessed as ‘cheap’ / ‘expensive’ using the Z-score - just like people use PE ratios to assess (normal) stocks

Z-score represents how far away the current premium/discount is from its average premium/discount over a selected time period. The distance is measured in standard deviations and the sign indicates the direction away from the mean.

MLN and KFL on this measure (on a 12 month time frame) are quite ‘expensive’

In big markets there’s a whole industry that study and invests in these sort of funds.