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I like this fund. I don't own it, but I really would like to. I think it would be a great long term holding in a Roth. My only concern is with the manager Albert Nicholas,. He's getting up there in years and I'm concerned about someone taking his place and not...well....not being Albert Nicholas.
Interesting. Not covered by M*. It's a 10 year MFO Great Owl. I believe it just crossed the 20 year mark and the lifetime numbers are just ok, maybe worse. More shortly.
A year of two ago when I was taking a closer look at mid cap value funds, this wound up on my short list. My concern was the same as yours, and I passed. For readers not checking dates - Albert O. Nicholas founded the management company in 1967, but that was already 15 years after he graduated college. In short, while I have great respect for experience, this octogenarian (born 1/24/1931) is no spring chicken.
Looking at the management sequence of this boutique's funds, it seems that David O. Nicholas was the heir apparent, but didn't always work out. The younger Nicholas started comanaging Nicholas II (NCTWX) in 1993, and took over completely in 2003. He remains the manager of this fund.
David similarly comanaged Nicholas (NICSX) from 1996 to 2008 (with the senior Nicholas staying on). And in 2001 he was added as the comanager of this fund (NSEIX) and also Nicholas High Income (NCINX). But in 2008, he ceased comanaging all three of these funds.
Other managers were gradually added in David's place. In 2003, the management company hired Lawrence J. Pavelec to handle high income investments for the company, including serving as a comanager of NCINX. (He became the sole manager in 2008; Albert had already departed from the fund in 2006.)
In 2011, the management company appears to have made another stab at lining up successors. David rejoined NICSX as a comanager with Albert. And Michael L. Shelton (who was hired by the management company as an analyst in 2006) was added as a comanager to NSEIX.
I like boutiques, but their small size does constitute a significant risk, especially when so much of the company's success seems to have been built upon a single individual. It seems clear that the company is trying to work out management succession. That's not an easy task, and looking at the track records of the funds now solely managed by successors - NCTWX (3*, average returns) and NCINX (2*, below average returns) - it seems to be a task they are still learning to master.
Perhaps David or others can add more. From the little I've pulled up, I wouldn't be (and wasn't) too comfortable with the fund. In fairness to Mr. Shelton, I haven't seen any hard information that would lead me to a conclusion about his skills, one way or the other. And ultimately, that's the real concern.
Dear Clem: I don't own it either, but like you I like this funds performance. Regarding Albert Nicholas age, 'don't cross a bridge until you get to it'. Regards, Ted Nicholas Equity Income Fund Fact Sheet: http://www.nicholasfunds.com/NEI/factsheet.pdf
And, here are the lifetime numbers (just shy of 20 years), again sorted by Sortino and against some other notables:
Kind of a worst to first story here. Maybe it's like msf notes above, performance changed as different folks moved in and out? Category drift? In any case, would want to better understand why the apparent inconsistency here.
Ha! Suspect it will lose it's Great Owl designation in January.
The fund family has a good record as GARP investors. NSEIX is their most value-oriented offering, accepting lower growth rates for greater yields. It's a family-owned business and the Nicholas family invests very heavily in their own funds, including this one. Not too many AUM and very low costs. Low risk by Morningstar standards. I used to own it and was quite happy with NSEIX but fairly recently sold it because I decided to go the global route (giving the managers maximum flexibility) with my funds (and FPRAX and TWEBX going the full global monty helped in my decision). Ab Nicholas's age is a concern, but the fund has done very well since Shelton came onboard. I can't think of a better midcap value fund if that's what you want.
Out of curiosity, I just checked out why the 15 year record of NSEIX should be so much inferior to the 10 year record. I see that NSEIX lost 13.21% in 1999 and lost 16.45% in 2002. I'd almost consider a poor 1999, the great tech bubble year, to be an encouraging sign; what happened in 2002, I don't know. By comparison, another decent midcap fund, FAMEX, lost 7.01% and 2.25% respectively during those years.
Dear Clem: I don't own it either, but like you I like this funds performance. Regarding Albert Nicholas age, 'don't cross a bridge until you get to it'. Regards, Ted
I used to own it and was quite happy with NSEIX but fairly recently sold it because I decided to go the global route (giving the managers maximum flexibility) with my funds (and FPRAX and TWEBX going the full global monty helped in my decision). Ab Nicholas's age is a concern, but the fund has done very well since Shelton came onboard.
Vert, its funny you mention those two funds. I've always been really interested in TWEBX. I love the multinantional names in the portfolio (and Tweedy's other funds as well). It will lag for long periods in bull mkts but its does well in down mkts. It takes patience for sure. I've recently looked at FPRAX. Also the new fund FPIVX which is Int'l which I'd pair with FPACX for a more global allocation. Clem
Clem, we must think alike as I went back and forth between pairing FPIVX with FPACX or just going with FPRAX. Decided that the size of FPACX meant that American smallcaps would be ruled out whereas FPRAX is small enough to go anywhere and would also be considerably cheaper.
Comments
Looking at the management sequence of this boutique's funds, it seems that David O. Nicholas was the heir apparent, but didn't always work out. The younger Nicholas started comanaging Nicholas II (NCTWX) in 1993, and took over completely in 2003. He remains the manager of this fund.
David similarly comanaged Nicholas (NICSX) from 1996 to 2008 (with the senior Nicholas staying on). And in 2001 he was added as the comanager of this fund (NSEIX) and also Nicholas High Income (NCINX). But in 2008, he ceased comanaging all three of these funds.
Other managers were gradually added in David's place. In 2003, the management company hired Lawrence J. Pavelec to handle high income investments for the company, including serving as a comanager of NCINX. (He became the sole manager in 2008; Albert had already departed from the fund in 2006.)
In 2011, the management company appears to have made another stab at lining up successors. David rejoined NICSX as a comanager with Albert. And Michael L. Shelton (who was hired by the management company as an analyst in 2006) was added as a comanager to NSEIX.
I like boutiques, but their small size does constitute a significant risk, especially when so much of the company's success seems to have been built upon a single individual. It seems clear that the company is trying to work out management succession. That's not an easy task, and looking at the track records of the funds now solely managed by successors - NCTWX (3*, average returns) and NCINX (2*, below average returns) - it seems to be a task they are still learning to master.
Perhaps David or others can add more. From the little I've pulled up, I wouldn't be (and wasn't) too comfortable with the fund. In fairness to Mr. Shelton, I haven't seen any hard information that would lead me to a conclusion about his skills, one way or the other. And ultimately, that's the real concern.
Regards,
Ted
Nicholas Equity Income Fund Fact Sheet: http://www.nicholasfunds.com/NEI/factsheet.pdf
Kind of a worst to first story here. Maybe it's like msf notes above, performance changed as different folks moved in and out? Category drift? In any case, would want to better understand why the apparent inconsistency here.
Ha! Suspect it will lose it's Great Owl designation in January.
Hope this helps.
Out of curiosity, I just checked out why the 15 year record of NSEIX should be so much inferior to the 10 year record. I see that NSEIX lost 13.21% in 1999 and lost 16.45% in 2002. I'd almost consider a poor 1999, the great tech bubble year, to be an encouraging sign; what happened in 2002, I don't know. By comparison, another decent midcap fund, FAMEX, lost 7.01% and 2.25% respectively during those years.
Regards,
Ted
That's not bad advice Ted. Thanks!
Clem
Vert, its funny you mention those two funds. I've always been really interested in TWEBX. I love the multinantional names in the portfolio (and Tweedy's other funds as well). It will lag for long periods in bull mkts but its does well in down mkts. It takes patience for sure. I've recently looked at FPRAX. Also the new fund FPIVX which is Int'l which I'd pair with FPACX for a more global allocation.
Clem