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Aston Funds to liquidate five funds (incl. ASTON/River Road Independent Value Fund)
WTF?! Why ARIVX? This should be a crime. You cannot keep a fund around with almost in cash selling it as a strategy only to close it.
I hope I don't see Cinnamond selling Cinnabons now. Or may be he will move to another state and restart his fund.
Let me go and put a sell order on this one. I just don't get it. It has $330 Million as per M*. How much effing money does Aston want to make in fees it can't keep this fund open. However, in a way it is best if Cinnamond starts his own boutique fund. At least I hope so.
For what interest it holds, I've been talking with Mr. Cinnamond about the decision. Two quick takeaways: (1) he's sympathetic with critics of the fund who decry a stock fund that's at 90% cash and climbing. (2) Given recent developments, he doesn't know when we'll next see a "normal" investing environment. Central banks are almost certain to follow free money policies, which only reward speculators, for the foreseeable future.
I'll try to flesh that out in our July edition but the fuller story will appear in August. Mr. Cinnamond remains employed at River Road, and behold to Aston, until July 6. After July 6, his reflections won't implicate Aston or River Road which are both constrained by FINRA rules about communicating with the public. So we'll chat in mid-July and I'll share what I learned.
I'll discuss in July's issue my own decision. When Artisan SCV was to be liquidated, I took the cash rather than allow a rollover to Artisan MCV. After spending a lot of time working with the numbers through our premium screener, the choice came down to ARIVX or Intrepid Endurance. I chose Endurance for a couple reasons: same discipline, slightly more flexible approach. Mr. Cinnamond is up 9.2% YTD, 6.2% over the TTM and 3.3% over the past five years; Intrepid is up 6.2%, 1.2% and 4.2% in those same periods. Both have had marginal volatility.
@David & MfO Members:The fund's YTD and 1Yr. returns are due mainly to positions in precious metals stocks, but let's not try and put lipstick on a pig. The 3 & 5 year returns for ARIVX put it in the 95 and 94 percentile coupled with it's extremely high cash position make it a prime candidate to serve on Thanksgiving Day ! Regards, Ted
I'm not quite sure why people love these funds that will take such high cash positions... I get the whole "hold cash because valuations aren't compelling thing," but do you really want to pay 142 bps for 90% of a portfolio that earns you nothing?
I don't mind the idea of a manager going to cash if he sees fit. What I didn't like about ARIVX was that the manager allowed himself to be caught in a value trap. And in a Hussman-esk way, he couldn't admit it or change it. His bet on commodities and PM stocks was early, way-way to early, multiple years early, and his investors took a huge beating for it. So in my book, he is a manager with poor sector decision making abilities. The funds poor performance has nothing to do with cash. It has to do with his stock picking.
I was curious about your observation so went back to check the numbers. The stocks in ARIVX have returned approximately 92% YTD, 50% over the trailing twelve months and 13% over the past three years. For comparison, the Vanguard SCV index returned 5.3, -1.7 and 9.4%. That assumes cash levels of 90, 80 and 75% for those three time periods. I don't have a firm grasp on the 5-year cash average - it looks to be in the mid60s - so I didn't want to venture an estimate there. If you accept mid60s, then the stocks have returned about 10%/year, about in-line with the index. At one level, it seems that his stocks have substantially and pretty consistently outperformed.
I hadn't thought much about precious metals. Mr. Cinnamond's argument when we last discussed it was that he wasn't particularly thrilled by gold but the mining stocks were getting hit so badly that they were among the few passing his value screen. He suggested that he actually could have justified a bigger position but wasn't comfortable with it. At the end of 2014, gold and silver stocks represented about 8% of the portfolio and about 33% of the stocks in the portfolio. There were four stocks, two of which remain in the portfolio and he subsequently added two more. They represent about 7.5% of the portfolio and about 70% of his stock holdings. The fund has a really low correlation to precious metals (0.34 to DBP, the PowerShares Precious Metals ETF) so I'm reluctant to praise or blame the fund's stake in such stocks.
@David: With all due respect , your going to need some more lipstick ! The average SCV Fund returned 5.27% over 3Yr. period, and 7.48% over 5Yr. ARIVX has returned 2.52 and 3.28 over the same peroid of time which is 50% less than the average SCV Fund. Regards, Ted
Sorry, no. I wasn't addressing the question of the fund's total return. Mike's arguments were that the stocks in the portfolio were weak performers and that the fund was both cursed and blessed (depending on time frame) by Mr. Cinnamond's precious metal investments.
I'm certainly aware that the fund's absolute returns substantially trail its peers over the past five years. On the other hand, looking at raw returns without looking at volatility is delusional since we know that volatility is a key determinant of investor behavior (mostly self-destructive). On that basis, the fund captured about 40% of its peers' annualized five-year returns and experienced 41% of their volatility.
Hi David. I bought the fund when it opened with high expectations and sold it, I think towards the end of 2013 or early 2014. I haven't paid much attention to it since, but my memory for selling was because of it's early and very high stake in mining stocks. That hasn't changed. A quick look at ARIVX portfolio in M* still shows it's 3 top holdings as AGI, PAA, NGD. M* says ARIVX has 11.4% in stocks. The 3 PM stocks I show are 6.6% of the portfolio.
These 3 stocks are on a tear this year and likely are the reason for good YTD and 1 year returns. But the previous 3 years, PM stocks under performed the general small cap value index by a large margin, AGI down -25% in '13, -34% in 14' -45% in '15. PAA -31%, -9%, -13%. NGD -50%, -10%, -35%. If Cinnamond held PM stocks, which I'm guessing he did, through those years he bet wrong. He picked poorly - at least his timing was poor.
Like I said, I have not followed the fund in quite a while. My memory 3 years ago is the manager was heavily weighted miners and sat on heavy losses because of that. This look at his portfolio through M* shows that hasn't changed. The difference now, 4-5 years later is those stocks are finely having their day. But that was way to early a bet in my book.
As far as the funds coloration to PMs, isn't that just an effect of cash having a low coloration to PMs. His stocks being over 50% PMs on the other hand...
I did like MikeM, bought when it opened, sold it late 2013 for a decent gain because I found his emphasis on PM stocks and how the market was "rigged" unimpressive. I generally think that managers who claim that the market is rigged mean that they just don't know how to invest in it which, to his credit, he seems to recognize now, according to David: "Given recent developments, he doesn't know when we'll next see a "normal" investing environment. Central banks are almost certain to follow free money policies, which only reward speculators, for the foreseeable future."
I respect that. He's saying he doesn't understand this market and isn't comfortable with it, so, if I understand him right, he's letting his fund be shut down despite respectable AUM. If more managers had that attitude, the investing world would be a better place.
Reminds me of a younger fund manager who decided to liquidate his fund as he could not find any investments that met his requirements. He went onto to do pretty good with a rather small company at the time, called Berkshire Hathaway. Eric, good luck to you and I will wait for you to get back into this in the next few years.
Comments
I hope I don't see Cinnamond selling Cinnabons now. Or may be he will move to another state and restart his fund.
Let me go and put a sell order on this one. I just don't get it. It has $330 Million as per M*. How much effing money does Aston want to make in fees it can't keep this fund open. However, in a way it is best if Cinnamond starts his own boutique fund. At least I hope so.
I'll try to flesh that out in our July edition but the fuller story will appear in August. Mr. Cinnamond remains employed at River Road, and behold to Aston, until July 6. After July 6, his reflections won't implicate Aston or River Road which are both constrained by FINRA rules about communicating with the public. So we'll chat in mid-July and I'll share what I learned.
I'll discuss in July's issue my own decision. When Artisan SCV was to be liquidated, I took the cash rather than allow a rollover to Artisan MCV. After spending a lot of time working with the numbers through our premium screener, the choice came down to ARIVX or Intrepid Endurance. I chose Endurance for a couple reasons: same discipline, slightly more flexible approach. Mr. Cinnamond is up 9.2% YTD, 6.2% over the TTM and 3.3% over the past five years; Intrepid is up 6.2%, 1.2% and 4.2% in those same periods. Both have had marginal volatility.
More soon,
David
Regards,
Ted
I was curious about your observation so went back to check the numbers. The stocks in ARIVX have returned approximately 92% YTD, 50% over the trailing twelve months and 13% over the past three years. For comparison, the Vanguard SCV index returned 5.3, -1.7 and 9.4%. That assumes cash levels of 90, 80 and 75% for those three time periods. I don't have a firm grasp on the 5-year cash average - it looks to be in the mid60s - so I didn't want to venture an estimate there. If you accept mid60s, then the stocks have returned about 10%/year, about in-line with the index. At one level, it seems that his stocks have substantially and pretty consistently outperformed.
I hadn't thought much about precious metals. Mr. Cinnamond's argument when we last discussed it was that he wasn't particularly thrilled by gold but the mining stocks were getting hit so badly that they were among the few passing his value screen. He suggested that he actually could have justified a bigger position but wasn't comfortable with it. At the end of 2014, gold and silver stocks represented about 8% of the portfolio and about 33% of the stocks in the portfolio. There were four stocks, two of which remain in the portfolio and he subsequently added two more. They represent about 7.5% of the portfolio and about 70% of his stock holdings. The fund has a really low correlation to precious metals (0.34 to DBP, the PowerShares Precious Metals ETF) so I'm reluctant to praise or blame the fund's stake in such stocks.
David
Regards,
Ted
Sorry, no. I wasn't addressing the question of the fund's total return. Mike's arguments were that the stocks in the portfolio were weak performers and that the fund was both cursed and blessed (depending on time frame) by Mr. Cinnamond's precious metal investments.
I'm certainly aware that the fund's absolute returns substantially trail its peers over the past five years. On the other hand, looking at raw returns without looking at volatility is delusional since we know that volatility is a key determinant of investor behavior (mostly self-destructive). On that basis, the fund captured about 40% of its peers' annualized five-year returns and experienced 41% of their volatility.
Back to writing!
David
These 3 stocks are on a tear this year and likely are the reason for good YTD and 1 year returns. But the previous 3 years, PM stocks under performed the general small cap value index by a large margin, AGI down -25% in '13, -34% in 14' -45% in '15. PAA -31%, -9%, -13%. NGD -50%, -10%, -35%. If Cinnamond held PM stocks, which I'm guessing he did, through those years he bet wrong. He picked poorly - at least his timing was poor.
Like I said, I have not followed the fund in quite a while. My memory 3 years ago is the manager was heavily weighted miners and sat on heavy losses because of that. This look at his portfolio through M* shows that hasn't changed. The difference now, 4-5 years later is those stocks are finely having their day. But that was way to early a bet in my book.
As far as the funds coloration to PMs, isn't that just an effect of cash having a low coloration to PMs. His stocks being over 50% PMs on the other hand...
I respect that. He's saying he doesn't understand this market and isn't comfortable with it, so, if I understand him right, he's letting his fund be shut down despite respectable AUM. If more managers had that attitude, the investing world would be a better place.