Lumiere Value Fund

[dydx]

Nah... not easy to manage other people's monies...

This is really true! That's why many skilled investors just want to invest their own money, and restrict to money of their family members and close friends if they choose to invest for others. While the extra 1+% fees from investing others' monies in a fund seem attractive to some investors turned fund managers, my own view is that it is not really that worthwhile for those investors who know they can succeed on their own. And I think it is a danger to simply believe that a fund manager can or will always look after even the interests of his investors, as in practice it is very difficult to achieve total alignment of interests between a fund manager and his investors, even though he has his own money in the same fund.

[dzwm87]

The Lumiere manager probably has not experienced a major decline before except GFC.
Their gross exposure dropped to 64% in mar 09 coincidentally at the lowest point of the GFC or STI index.

They also reduced their exposure in last Oct 11 probably because of the impending Euro crisis.
Of course, no one can forsee any impending crisis. But, a value investor should probably be braver when the crisis is at the deepest.

Perhaps it has something to do with redemptions?
IMO, the most difficult thing about managing a Fund is,

1) Most people only gets interested in investing when the market is 'hot'. During such times, it's more difficult to find stocks that are undervalued. Idle cash may actually drag down overall performance.

2) Most people gets fearful when market is having a severe correction. They'd want to 'cut loss'. Faced with redemptions, a Fund Mgr who's fully vested (for the fund) would be forced to sell his 'gems'. If the redemption is large enough, the Fund Mgr may actually end up being responsible for pushing the share price of his stocks to a new low...

IMO, I don't think it's cutting loss or succumbing to market fear. It's common across most other long term investment funds - they simply push back to cash when market crashes and then start to re-allocate monies into better & more undervalued stocks.

Think of it this way, when market crashes, don't you want to build your position in under-valued blue chips/better quality small & mid-cap businesses? Or will you stash all your cash in S-chips and probably those trading below net cash per share?

[CityFarmer]

IMO, I don't think it's cutting loss or succumbing to market fear. It's common across most other long term investment funds - they simply push back to cash when market crashes and then start to re-allocate monies into better & more undervalued stocks.

Think of it this way, when market crashes, don't you want to build your position in under-valued blue chips/better quality small & mid-cap businesses? Or will you stash all your cash in S-chips and probably those trading below net cash per share?

IMO, the approach is flaw.

If the investment is done rationally before market crash, base on value investment guideline. Chances are the stocks owned are the best stock to invest. So no action required.

[dzwm87]

IMO, the approach is flaw.

If the investment is done rationally before market crash, base on value investment guideline. Chances are the stocks owned are the best stock to invest. So no action required.

"best stock to invest" at that moment of time - which is assumed to be before the occurrence of the crisis.

Stretch it to the extreme for a better understanding. VICOM now at 15x P/E seemed pricey and it won't seem to be the best stock to invest right now. Suppose Euro crashed next week and VICOM drops to 3x P/E (exaggerated though! ), then VICOM becomes one of the better stocks to invest.

Of course, the issue becomes complex when you include in market execution - which is more towards how much "bullets" to average down..

[CityFarmer]

"best stock to invest" at that moment of time - which is assumed to be before the occurrence of the crisis.

Stretch it to the extreme for a better understanding. VICOM now at 15x P/E seemed pricey and it won't seem to be the best stock to invest right now. Suppose Euro crashed next week and VICOM drops to 3x P/E (exaggerated though! ), then VICOM becomes one of the better stocks to invest.

Of course, the issue becomes complex when you include in market execution - which is more towards how much "bullets" to average down..

IMO, "best stock to invest" remain the best during bear and bull time.

Base on the example of Vicom. If Vicom drop to 3x PE during a crisis, i assume the stock owned is also drop to similar degree if not worse. Of course, i assume the stock owned is at similar quality as Vicom.

If Vicom price drop due to factors other than crisis, then it is different story.

[etan]

My fund with D.O.G. is a lot less in upfront fees. It is driven by return, which is more aligned to fund investors. What's more, he shares his own holding statement quarterly. Not many fund managers will put his $ where his mouth is...

Wow cool! Good to know. One day I hope I can also attain the accredited investor status so that I can place my funds with d.o.g.! Haha!

I have an idea! Wonder if d.o.g. is interested?

How about pulling resources together, say per lot share of $100K x 10 pax = $1 mil.

Timing in the market is of essence.

Can make it happen?

Also, sometimes I think to myself: One fine day, VB will produce someone like OHL or Peter Lim! Just wait and see, ahahaha!

pooling fund from public need license. Pooling from accredited investors and other retail investors are different licenses.

OIC, the lazy me thought can leverage on OP's knowledge & expertise to make some $, biz deal: win-win situation.

Die die must learn DIY! Time is an issue.

[d.o.g.]

Die die must learn DIY! Time is an issue.

Time and money are mostly interchangeable. If you want money, you spend time (working for others). If you want to save time, you spend money (to pay others to work).

Investing is the same way. You want to save on fees, spend the time to educate yourself and DIY. You want to save time, spend the money to pay a professional. You have to make a choice. Doing nothing is also a choice...

[mysterion]

The fund charges a 1% management fee and 20% performance fee with high water mark.

Assuming $1,000,000 investment and a respectable and conservative long-term 10% year-on-year investment return:

20% performance fee would mean that the $100,000 investment gain would be reduced to $80,000 (i.e. real investment return will be only 8%). And after that, the 1% management fee will reduce the real investment return to 6.92%).

So the costs are actually pretty high (~3%); much higher if their long-term investment return beats the market significantly. Or is this just the industry norm?

You have missed the water mark. Say it is 8%.

For a $1m investment, the 20% performance fee only kicks in after $80k. So it is applied to the $20k only. ie, $4k.

So the fees are about $10k management fee + $4k performance fee.

Your $1.1m will become $1.086m or so. So they take about 1.4% based on 10% results.

Oh I see...haha thanks for the clarification and sorry for my noob calculations =/

[yeokiwi]

IMO, I don't think it's cutting loss or succumbing to market fear. It's common across most other long term investment funds - they simply push back to cash when market crashes and then start to re-allocate monies into better & more undervalued stocks.
Think of it this way, when market crashes, don't you want to build your position in under-valued blue chips/better quality small & mid-cap businesses? Or will you stash all your cash in S-chips and probably those trading below net cash per share?

Although it is easier to say than do, a good value investing fund should behave differently from the masses.
Or rather, they should buy when others were selling. Their gross exposure shows that they are doing the same as other panic investors.
At the minimal, they should keep their exposure and start to switch stocks.

But, maybe I had not managed OPM before and so it is easier for me to criticise.haha..

[etan]

Die die must learn DIY! Time is an issue.

Time and money are mostly interchangeable. If you want money, you spend time (working for others). If you want to save time, you spend money (to pay others to work).

Investing is the same way. You want to save on fees, spend the time to educate yourself and DIY. You want to save time, spend the money to pay a professional. You have to make a choice. Doing nothing is also a choice...

Well said, d.o.g.

I have been trying to get my son interested in stock investing for the last 4 yrs but it seems he's not interested; he always say busy and need to focus on his job. I think he cannot find any right time to start learning. I even brought him to attend one of Dennis Ng's seminar quite a few years back just so he can grasp the basics of personal financial management & investment. He even had a photo taken with Dennis at that time. Who would have guessed that Dennis is now gone!

Well to each his own! Cannot force lah!

Better pay the professionals to do the job or DIY. Better depend on ownself, than wait and wait ... sigh!