...I mean I get some of it, but not all of it.
If I'm reading Mr. Studzinski's commentary correctly (this month and, I believe, May or June's); he's pretty down on FPA, in particular FPA Crescent (FPACX). FPACX has grown tremendously, fee reductions have not matched the growth in AUM, and the fund has shifted its focus -- morphing from a historically small/mid-cap into a large cap fund, increasing international exposure, and so forth. The fund also holds a lot of cash.
This much I follow. I hold FPACX, and was likewise dubious when Romick started to allow AUM to inch skyward, and justified the shift from small-/mid- to large cap by stating that they saw more opportunities in the large cap space then the small cap space going forward, etc., etc. There have also been the platitudes about FPA keeping any eye on what their max capacity is, and repeated statements that their fees are justified because they hold shorts, and the occasional ETF and restricted investment vehicle.
But what I don't understand is Mr. Studzinski's comments in light of what has happened at a parallel fund like OAKBX (which I also hold). OAKBX had a close, then a quick head-scratching reversal to a re-open, not so long ago (the logic of which was never clear to me). The fund is also holding a great deal of short-term investments. And, if I understand the expansion in portfolio leadership, OAKBX is open to looking for more opportunities in fixed income, given some doubts about US Treasuries. Finally, OAKBX has an asset base that apporaches $20b, just like FPACX (both of which are larger than DODBX, and Dodge and Cox which, in spite of not directly advertising, isn't shy about letting asset bases creep up).
So, in the end, I'm not sure what the issues are...
That true fiduciaries are few and far between in the mutual fund world? I would totally agree (and I often spout my venom on Royce Funds here, sort of a poster child for the flavor-of-the-month, hype-driven, all-American-AUM-land-grab, and a fund family from which I am slowly divesting my wife and myself). "Investors First", FPA claims -- is it so; and if not, is it in a manner which is particularly egregious, or more par for the course in the mutual fund word?
That FPA gets away with charging above-average fees for routinely holding so much cash (typically 30% or )? Then shouldn't one also rail against Fairholme, Tweedy, First Eagle, and IVA for doing the same (none of which are cheap, BTW)? But shouldn't a true value manager have that latitude anyway?
That FPA, which as an organization comes across as a bit chippy and with R. Rodriguez's finger-wagging speeches and missives to the industry, has earned a reputation for aloofness, and is now emerging as hypocritical, perhaps most recently with the wholesale restructure of a couple of their funds (one of which David also highlighted in this month's commentary)? I loathe the LM/Royce's of the world, and am a glass-half-empty kind of guy in the first place -- but is FPA really there yet? Mr. Studzinski has rightfully directed ire at the industry as a whole in the past. But why the pointed attacks on FPA in particular? Shouldn't we also be casting doubt on Grandeur Peaks, then? And also Artisan (and what should we have made of Artisan's shopping for buyers)?
That FPA is understaffed for the type of growth FPACX has seen? I haven't done a tally, but it would appear their research staff is a bit undersized relative to their asset base. But how does one really know how many analysts are solely dedicated to a given fund? How large is D&C's international team, for example; or the OAKBX team?
Would anyone be able to shed a bit more light on the situation?
Cheers.
D.S.
Comments
Q2
2015 Update
Positioning:
Gross exposure to equities is circa 57%
and net exposure is approximately 53%
. Fixed Income remains low at around 2.3%
Added
to private investments, specifically
real estate partnerships
Cash is approximately 43%.
Outlook:
Challenging to find opportunities that meet our investment criteria.
We are looking at
coal, for profit education and aerospace/defense*******
http://www.fpafunds.com/docs/fpa-crescent-fund/q2-2015-crescent-update-w_o-cpi-docx.pdf?sfvrsn=2
*******Not exactly a politically liberal view of the future economy in those industries, is it.
.
P.S. And I mean that purely in an investment sense.