FPA International Value (FPIVX): manager Eric Bokota resigns

David_Snowball

Ryan Leggio at FPA called this afternoon to let me know that Eric has stepped down as portfolio manager and has resigned from the firm for personal reasons.

From the tenor of our conversation, Eric is facing a real (but necessarily unnamed) personal challenge. It's clear he wants to stay with the fund, that FPA wants him to stay and that they're hopeful he'll one day (but not soon) be able to return. Here's FPA's announcement: http://finance.yahoo.com/news/fpa-international-value-strategy-announcement-221300614.html

Here's what it means for the fund and its investors:

1. Pierre Py, who joined FPA from Harris with Eric, will become the sole manager.
2. Pierre and FPA will move, quickly, to add depth to the team. Eric served (1) as the Asia and Nordic specialist and (2) as a double-check on all of Pierre's proposed portfolio additions. They're talking with "very senior" analysts about the role.
3. the fund's strategy remains unchanged.

What does it mean for current or prospective shareholders? The change does not eliminate the underlying attractiveness of the fund; its discipline, parent and lead manager are all solid and solidly admirable. I would probably not initiate a new position in the fund until I knew the identities and strengths of the new team members. Given that the first of those individuals might join in the next weeks, the wait should not be burdensome.

I'm working on our August profile of the fund, which was informed by a long discussion with Eric. I'll try to speak a bit with Pierre before finishing the analysis.

For what interest it holds,

David

VintageFreak

My bad luck continues to be excellent. First MFLDX now FPIVX. Why can't the world leave my funds alone?
I'm going to stop telling people which funds I buy.

I'm now waiting for something bad happening at Hussman...

Harrrummmppphhhh

Charles

Bummer.

claimui

I am paying increasing attention to "manager risk" when picking funds. I appreciate that David mentions this point in his profiles. Many funds are built on the reputation of one or two superstar managers and of course there are any number of possible reasons why they may suddenly stop managing the fund. On one hand, I note that even if a fund has only one manager and he/she departs suddenly, there is still plenty of time for investors to react and adjust as needed. On the other hand, you have to spend extra time to study the situation and research alternatives, as well as the actual costs of taxes and expenses if you decide to switch funds.

Other funds emphasize a team concept and downplay the importance of any particular individual. I don't know who manages DODGX (for example) and my guess is most of its investors do not care.

Currently I have a mix of both kinds of funds. I think a higher amount of manager risk is acceptable as long as I am still actively engaged and interested in managing my portfolio. If that changes then I will likely want to pick more funds from the bigger fund families with broader support teams.

VintageFreak

Claimui, cannot argue with what you say, but IMHO if one is buying active funds, one should only do so by assuming manager risk. If one wants to assume market risk, one should buy index funds.

Buying active management and assuming market risk is insult to injury and is THE argument underlying the case for indexing over active management. I guess, the FPIVX situation is probably much better in retrospect. I still feel for those who were invested in Nuveen Global funds.

Regarding Dodge and Cox, American, Manning & Napier, I'm not going to talk about the greatness, altruism, whatever of these fund companies. I don't invest with them precisely because I don't know WTF is managing the funds really. If I'm buying Target Funds, I really don't care, but I don't. Full disclosure, I own DODWX because I inherited it, and only reason not selling it is because of the memory associated with it.

One more comment on "deep benches" at fund companies. With Artisan, it seems like a virtue. At Fidelity, that's just an excuse to play musical managers with fund chairs. I continue to gravitate my portfolio toward eponymous or small fund company managers without too many moving parts. Less parts, less trouble. This FPI situation seems to be something personal in the life of the manager, maybe death, injury, etc. to family member he does not want to disclose and needs to spend more attention at home to.

fundalarm

Reply to @VintageFreak: market risk is really beta exposure for equities, interest rate exposure for treasuries and credit exposure for corporates. you always have market risk, whether or not your funds are actively or passively managed, UNLESS of course you buy market neutral funds whereby beta adjusted long exposure equals beta adjusted short exposure and it is balanced every night. Another way to avoid market risk is to invest in real assets -- i.e. exchange market risk for liquidity risk. While manager selection is important and you seem very fluent in evaluating management teams, you always maintain exposure to beta/ market risk.