Seafarer at three

David_Snowball

Today's was Seafarer Overseas Growth & Income (SFGIX) fund's third anniversary; it launched February 15, 2012. Steady asset growth despite a tough stretch for the emerging markets. Annual returns since inception are, per Morningstar, 8%. The category average for the same period is 1%. The big gains came in the first year but he's steadily outperformed since then, too.

I'm not sure why the fund won't debut as a Five Star, Great Owl but I've been surprised before.

With luck, Andrew will join us for a conference call in April. You'd certainly be welcome to join if you'd like to talk with him.

As ever,

David

Mona

David_Snowball said:

Today's was Seafarer Overseas Growth & Income (SFGIX) fund's third anniversary; it launched February 15, 2012. Steady asset growth despite a tough stretch for the emerging markets. Annual returns since inception are, per Morningstar, 8%. The category average for the same period is 1%. The big gains came in the first year but he's steadily outperformed since then, too.

I'm not sure why the fund won't debut as a Five Star, Great Owl but I've been surprised before.

With luck, Andrew will join us for a conference call in April. You'd certainly be welcome to join if you'd like to talk with him.

As ever,

David

David,

In your opinion would SFGIX (SIGIX) be a replacement for MAPIX?

I currently own MAPIX and MACSX.

Mona

Charles

Great Owl for sure!

Here are numbers through January. Slams the category.

The risk numbers are much better too, even though our current methodology pegs it at 5. In our update next month, that will likely go to 4. In this bull market, everything "looks" risky when compared to SP500. If I get the update incorporated sooner, will post.

But the basic metrics speak for themselves.

Seems to me Mr. Foster and crew have delivered as promised. Fortunately, we own one of first accounts...a rare enlightened moment .

David_Snowball

Hi, Mona.

There's not much overlap between the two funds, so it's hard to call one a substitute for the other. MAPIX is about 50/50, emerging and developed with a 25% stake in Japan, 70% large to mega cap. Seafarer is about 70/30 with the 30 beginning developed Asian markets but not Japan, 35% large to mega cap. And of course Seafarer is 60% Asia to MAPIX at 100%. So Seafarer has a smaller market cap, no Japan but a substantial chunk in Europe (15%) and Latin America (15%).

Too, Seafarer is $130 million against $5 billion for the two Matthews' funds.

That said, all are very risk conscious, well-managed and substantially driven by the fate of emerging Asia.

Sorry for the wimpy response.

David

Crash

SFGIX. REALLY caught fire since mid-January. I bought-in during Sept, 2012. Glad I did, every day.

David_Snowball

Hi, Crash.

Typical of Andrew's caution, he posted a warning about the source of the "caught fire" period. An Indian pharma company popped 70% in a week, making it the firm's largest holding. Here's an excerpt of Andrew's special letter to shareholders following the pop:

[W]e wish to draw shareholders’ attention to the extremely speculative nature of this position: the company has scant revenues; it has only recently begun to sporadically produce profits, and those sporadic profits are still intermingled with frequent losses; and the company has no consistent ability to produce cash flow, much less pay a dividend to its shareholders. There is no certainty regarding the company’s future or even its continued existence.

... this position represents a substantial departure from the Fund’s “core” strategy of seeking steady growth along with steady and growing dividends. It is a special exception to the regular construction of the Fund, and in my personal opinion, it is unique in its nature.

When any position – especially a speculative one such as SPARC – appreciates so abruptly, I am prone to sell the underlying stock ... to mitigate the possibility that the position’s new size might induce unwanted, negative volatility ... based on the facts currently at my disposal, I have elected not to substantially reduce SPARC’s position size at this time ... because, based on my assessment of the company’s unique business model, its governance and management, and the scale of the economic opportunity that it is pursuing, it reasonably has the potential to become substantially more valuable over the next decade.

Accordingly, and on behalf of Seafarer, I wish to advise all shareholders of the potential for heightened volatility in the Fund’s NAV.

Andrew's letter had been discussed earlier, but I thought it wise to highlight it again given this thread.

Andrew was in India this week. I'll be curious to read his Field Notes on the experience.

For what interest it holds,

David

Ted

@MFO Members: So far, winner winner, chicken dinner !
Regards,
Ted

Derf

Thought about DCA into fund, but see expense wavier will go into effect in ( August ?).
If I'm reading this right , more drag on performance.
Derf

LLJB

Does anyone know how often funds actually eliminate their expense waiver? I have never researched it at all, but I wonder if most funds extend their expense waivers until assets grow big enough that its not needed anymore. It would seem like bad marketing to tease with a lower expense ratio and then let it go higher. As a relatively long term investor ("relatively" because there are many here who really do seem to hold funds forever and I'm not quite so committed) I would be hesitant to invest in a fund with an expense waiver if the fund family had demonstrated my costs were going to increase (in some cases significantly) if they weren't able to do a good enough job to attract assets.

Crash

Thanks, David. That's good information.

David_Snowball

Hi, Derf.

One simple expedient would be to drop a note to Seafarer and ask. In general, expense waivers are almost never revoked although many contain a "clawback" provision. At base, advisers sometimes subsidize a fund until it hits a breakeven point but then they don't lower the expense ratio further until they've recouped some or all of the money they spent underwriting fund operations. In Seafarer's case, they can recoup expenses for the three years immediately prior to when they turn profitable.

Andrew joked at one point that he and I both run non-profit entities, the difference between that I do it on purpose.

A concern for shareholders is, I believe, part of Seafarer's DNA. They've repeatedly lowered their expense ratio, despite the fact that Morningstar wouldn't give them credit for the move since Morningstar uses the expense ratios from the annual report. Morningstar reports a 1.4% e.r. for Seafarer, which reflects the April 2014 Annual Report's calculation of the fund's 2013 expenses. The September 2014 prospectus commits to a 1.25% e.r. but Morningstar's profile of the fund in 2015 reports the expenses investors bore in 2013 as if they were current.

As ever,

David

00BY

I bought MACSX when Foster was there and stayed with it. I have always wanted to trade the position for SFGIX, but the absolute returns and risk of MACSX haven't given me any reason to leave. SFGIX has a wider reach and a much lower aum, but last I checked the returns of MACSX have been slightly higher.

Edit, looks like the sea farer pop in January has put it slightly ahead of MACSX

Sven

I always like Andrew Foster on many fronts and made the change backed in 2012. Now the fund is doing quite well.

Crash

SFGIX is in top 4% of category going back to its birth, 3 years ago. More recently, top 1%. That surely cannot be sustained, but it's nice to see. MACSX? "Not so much."
http://quotes.morningstar.com/fund/f?t=SFGIX&region=USA