Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
The big picture at Grandeur Peak (from our August 2013 issue)
In the course of launching their new Global Reach fund, profiled below, Grandeur Peak decided to share a bit of their firm’s long-term planning with the public. Grandeur Peak’s investment focus is small- to micro-cap stocks. The firm estimates that they will be able to manage about $3 billion in assets before their size becomes an impediment to their performance. From that estimate, they backed out the point at which they might need to soft close their products in order to allow room for capital growth (about $2 billion) and then allocated resource levels for each of their seven envisioned strategies.
Those strategies are:
Global Reach, their 300-500 stock flagship fund
Global Opportunities, a more concentrated version of Global Reach
International Opportunities, the non-U.S. sub-set of Global Reach
Emerging Markets Opportunities, the emerging and frontier markets subset of International Opportunities
US Opportunities, the U.S.-only subset of Global Opportunities
Global Value, the “Fallen Angels” sub-set of Global Reach
Global Microcap, the micro-cap subset of Global Reach
President Eric Huefner remarks that “Remaining nimble is critical for a small/micro cap manager to be world-class,” hence “we are terribly passionate about asset capping across the firm.” With two strategies already closed and another gaining traction, it might be prudent to look into the opportunity.
I like the outfit (not an investor with them now), but I don't like the idea of a hard close. I'm a big fan of the soft close, but I'd like to be able to contribute more going forward.
I haven't seen too many hard closes, come to think of it.
I like the outfit (not an investor with them now), but I don't like the idea of a hard close. I'm a big fan of the soft close, but I'd like to be able to contribute more going forward.
I haven't seen too many hard closes, come to think of it.
As discussed previously for GPROX, exceptions include (direct shareholders only): 1. Retirement accounts 2. Education savings accounts 3. Minor accounts (UTMA, UGMA) 4. Accounts with AIP established prior to closing
Not sure why they closed Global Reach to new investors so soon. I guess they have confidence existng shareholders will invest more. GPGOX while closed is 3+ the size of GPROX. I don't recall when the closed GPGOX to existing investors, but given its narrower mandate, I'm thinking Global Reach should have been lanched first instead of later. I'm finding their reasons and order in which they are starting funds a little confusing.
I guess investors cannot complain too much they are closing funds early. Hard closed funds of course will behave like pseudo-CEFs, which is what they probably want. Stable set of shareholders that hold on for the ride. Of course they can redeem without anyone else buying their shares.
Speaking of which, someone needs to start a website offering service for person A to sell his mutual fund shares to person B. Might help the markets if fund does not have to sell shares on open market to meet redemptions, and again buy. Wouldn't this reduce the effect fund has on volatility of the stocks in portfolio?
This might be the smallest close in terms of AUM that I can recall. I could understand if they justified it by wanting to curtail a rapid influx, but that's not the case.
If I were to hazard a guess, in hindsight, the fine folks behind Grandeur Peaks may not have anticipated how quickly their first two funds, GPGOX and GPIOX gathered assets - $700-800-Million each in no time flat. Combined, that's half of what they thought was their $3-Billion AUM max.
Perhaps they should have put a lid on GPGOX and GPIOX earlier, to even out the inflows as they rolled out their newer strategies (all told, 7 funds). That's not a criticism, just an observation.
This is good news but somehow I feel a little suspicious. The writer couldn't even get where they are located right. I assume he took the mailing address from their website, which I'm pretty sure is the mailing address of the unrelated company that distributes their funds, and failed to read virtually anything else on the website that makes it pretty clear where they're located.
Second, the article is primarily about them hard closing funds and then he throws in this statement at the end about the remaining strategies. Anyone who's paid any attention to GP should know that the hard closes are old news but the timetable for more funds is new news and should have been the focus of the article (if true).
Finally, in all my communications with GP I think they've been fairly circumspect about their plans. In another discussion about GP recently I did say that I was told not to expect another fund until next year in contrast to a comment that suggested a fund might appear at the end of this year. It seems more likely he picked this up from some discussion board rather than actually getting GP to share their more detailed plans with him.
Who knows, I'll be happy if he's right but I'm not holding my breath.
Speaking of which, someone needs to start a website offering service for person A to sell his mutual fund shares to person B. Might help the markets if fund does not have to sell shares on open market to meet redemptions, and again buy. Wouldn't this reduce the effect fund has on volatility of the stocks in portfolio?
You've got a winning idea there VF. There used to be a brokerage called Jack White that had this service. It was great. You could get into funds that had closed. Then Jack White was bought out by Waterhouse, which eventually became part of TD Ameritrade.
I agree its a great idea but in some way it must be restricted. If, for instance, person A could sell some portion of his/her shares in a closed fund (let's assume its the minimum investment amount) to person B, then except for a hard closed fund, person A could add back to his invest and person B would theoretically have the ability to add to their investment as well. Essentially the fund isn't closed anymore. Of course maybe it just hasn't been a problem so there's been no need for a solution and even if it lead to far more hard closes there would presumably still be a market for exchanges.
For open funds it would seem difficult to get anyone to buy at anything other than NAV and they'd only do that if the transaction cost was lower than buying it from their own broker or straight from the fund company. For soft closed funds there should be some premium to gain access to the fund and for hard closed funds there should presumably be a bigger premium.
Assuming its possible, the question in my head is whether it would be better to become a brokerage like Jack White was or whether it'd be better to just become the Ebay of mutual funds.
@LLJB: The way the Jack White brokerage did it was interesting. You put your name on a list at Jack White, telling them what funds you wanted to purchase and how much.
They took care of the rest. This worked great to buy load funds without paying the load, and to get into mutual funds that were closed.
Let's say you wanted to buy a fund with a 5.75% load, but you didn't want to pay the load. The brokerage would contact you when they had a seller. Your only contact was with the brokerage firm. They would charge you a flat fee, and give the seller half of it. You could purchase as much of the fund as was being sold for the flat fee.
I also got into two closed funds privately, by finding someone online who was willing to sell me shares of the fund! It was surprisingly easy. Two perfect strangers sold me shares of two different closed mutual funds, both highly regarded funds. I'm still in both of those funds today, as well as the load funds and closed funds I got into thru Jack White.
TD Ameritrade. Sucky brokerage, and now I learn the one bright idea they inherited, they trashed.
One day, when most active funds go away and only the few deserving ones remain, and the pickings are slim, may be someone will start George Black brokerage and offer this service again.
Comments
In the course of launching their new Global Reach fund, profiled below, Grandeur Peak decided to share a bit of their firm’s long-term planning with the public. Grandeur Peak’s investment focus is small- to micro-cap stocks. The firm estimates that they will be able to manage about $3 billion in assets before their size becomes an impediment to their performance. From that estimate, they backed out the point at which they might need to soft close their products in order to allow room for capital growth (about $2 billion) and then allocated resource levels for each of their seven envisioned strategies.
Those strategies are:
- Global Reach, their 300-500 stock flagship fund
- Global Opportunities, a more concentrated version of Global Reach
- International Opportunities, the non-U.S. sub-set of Global Reach
- Emerging Markets Opportunities, the emerging and frontier markets subset of International Opportunities
- US Opportunities, the U.S.-only subset of Global Opportunities
- Global Value, the “Fallen Angels” sub-set of Global Reach
- Global Microcap, the micro-cap subset of Global Reach
President Eric Huefner remarks that “Remaining nimble is critical for a small/micro cap manager to be world-class,” hence “we are terribly passionate about asset capping across the firm.” With two strategies already closed and another gaining traction, it might be prudent to look into the opportunity.Hmmm.....Global Reach only has a market cap average of 718 million.
Sounds like a micro-cap subset will probably have a market cap of 200-300 million
I haven't seen too many hard closes, come to think of it.
1. Retirement accounts
2. Education savings accounts
3. Minor accounts (UTMA, UGMA)
4. Accounts with AIP established prior to closing
Statement from fund:
http://www.grandeurpeakglobal.com/documents/pdfs/grandeurpeakglobal-pr-20140905.pdf
I guess investors cannot complain too much they are closing funds early. Hard closed funds of course will behave like pseudo-CEFs, which is what they probably want. Stable set of shareholders that hold on for the ride. Of course they can redeem without anyone else buying their shares.
Speaking of which, someone needs to start a website offering service for person A to sell his mutual fund shares to person B. Might help the markets if fund does not have to sell shares on open market to meet redemptions, and again buy. Wouldn't this reduce the effect fund has on volatility of the stocks in portfolio?
This might be the smallest close in terms of AUM that I can recall. I could understand if they justified it by wanting to curtail a rapid influx, but that's not the case.
Perhaps they should have put a lid on GPGOX and GPIOX earlier, to even out the inflows as they rolled out their newer strategies (all told, 7 funds). That's not a criticism, just an observation.
Second, the article is primarily about them hard closing funds and then he throws in this statement at the end about the remaining strategies. Anyone who's paid any attention to GP should know that the hard closes are old news but the timetable for more funds is new news and should have been the focus of the article (if true).
Finally, in all my communications with GP I think they've been fairly circumspect about their plans. In another discussion about GP recently I did say that I was told not to expect another fund until next year in contrast to a comment that suggested a fund might appear at the end of this year. It seems more likely he picked this up from some discussion board rather than actually getting GP to share their more detailed plans with him.
Who knows, I'll be happy if he's right but I'm not holding my breath.
For open funds it would seem difficult to get anyone to buy at anything other than NAV and they'd only do that if the transaction cost was lower than buying it from their own broker or straight from the fund company. For soft closed funds there should be some premium to gain access to the fund and for hard closed funds there should presumably be a bigger premium.
Assuming its possible, the question in my head is whether it would be better to become a brokerage like Jack White was or whether it'd be better to just become the Ebay of mutual funds.
They took care of the rest. This worked great to buy load funds without paying the load, and to get into mutual funds that were closed.
Let's say you wanted to buy a fund with a 5.75% load, but you didn't want to pay the load. The brokerage would contact you when they had a seller. Your only contact was with the brokerage firm. They would charge you a flat fee, and give the seller half of it. You could purchase as much of the fund as was being sold for the flat fee.
I also got into two closed funds privately, by finding someone online who was willing to sell me shares of the fund! It was surprisingly easy. Two perfect strangers sold me shares of two different closed mutual funds, both highly regarded funds. I'm still in both of those funds today, as well as the load funds and closed funds I got into thru Jack White.
One day, when most active funds go away and only the few deserving ones remain, and the pickings are slim, may be someone will start George Black brokerage and offer this service again.