Have you lost confidence in FMIJX/FMIYX, S-T or L-T?

mcmarasco

I'm a long-time investor in FMIJX/FMIYX, from the launch. I have profited very well from my investment to this point, BUT, I was a bit dissapointed in 2017's return, 98th percentile and now this year, albeit only 2.5 weeks into 2018, again 98th percentile.

I am beginning to lose a "little" confidence in FMIJX. Obvioulsy, we are only talking about the past 13 months or so but the direction is trending down.

I still like the overall metrics and investment philosophy, but something is just not clicking.

Outside of the dollar hedge not working, does anybody have any thoughts on what might be holding back this historically excellent fund?

Are you losing any confidence in FMIJX? If not, why not? If so, why so?



Thanks for any thoughts, suggestion and opinions!!

Matt

fyi, also posted on M*

Ted

@mcmarasco: Since your already playing with house money, I give it some more time. However, if in continues to lag in the next three months you should consider taking your profits and run. I have always believed in romancing a fund but never marry it.

willmatt72

This fund has an excellent long term record, so I would give it more time before jumping ship. It held a small stake in Asia, virtually no emerging markets and a high cash position, which held it back in 2017. The dollar hedging didn't help, either. Managers can't make the correct calls every year but I would watch it and see how it does in 2018. I suspect if there is a correction, it will hold up better than most.

msf

As with VMNFX, FMIJX is currency hedged. This has made a big difference in the past few years, as the dollar has gone from soaring in 2016 to diving in 2017.

If what you want is a smoother ride (i.e. one where currency is taken out of the equation), these were and are fine funds. If you want full exposure including currency volatility, buy something else.

Here's a chart showing these two funds against the foreign large blend average. While the two funds occasionally diverge (as would be expected, with one foreign one global), you can see how they take off relative to foreign large blend in 2016, and then foreign large blend nearly catches up in the subsequent year.

Morningstar comparison chart.

JoJo26

FMI is a very defensive manager. In a go-go market, you should expect the Fund to underperform. Given the concentration, the underperformance in such a market can be amplified.

mcmarasco

Appreciate the comments and insights! Thx!!

It's sometimes hard to accept SIGNIFICANT under performance. The 98th percentile in 2017 and early 2018 does not make a trend, but should it not raise "some" concern going forward???

Does it not warrant monitoring or am i being a little short-sighted and impatient?

JoJo26

I definitely understand. It's always tough to stomach that type of underperformance, however, I think one year is much too short of a time horizon to be concerned. If it's not something you can tolerate, you're honestly much better just indexing.

BenWP

I have also taken note of the drop off in performance of FMIJX. When I read the managers' reports I come away with the sense that I am a wild-eyed risk taker compared to them. Maybe I need a dose of caution, but those guys make investing sound as though the whole economic system might implode at any time. Not selling, in any case. One fund doing well recently is QVFOX; although it's more growth-oriented than FMIJX, it goes its own way and does so with relatively little turnover.

Ted

@BenWP; You mean QVOPX ?
Regards,
Ted

slick

I too own FMIJX but it is not my only intl fund. Technically it is global, since there is some domestic. I paired it with SIFIX and GHISX, all of which have both US and foreign. I also have IWIRX which by M* standards is large cap growth, but is global fund for me. I attribute FMIJX stalling to sticking to its guns on being a value shop and having become popular, so more cash to put to work when value is out of favor. Im giving it time. You might consider adding a more growth oriented fund in this space, to catch both the value and growth pendulum that seem to swing at different times.

PRESSmUP

mcmarasco said:

Appreciate the comments and insights! Thx!!

It's sometimes hard to accept SIGNIFICANT under performance. The 98th percentile in 2017 and early 2018 does not make a trend, but should it not raise "some" concern going forward???

Does it not warrant monitoring or am i being a little short-sighted and impatient?

Yes, they trailed badly in 2017, but this was after a relative performance of 2nd, 8th and 1st in 2014, 2015 and 2016 respectively. As Ben noted, their analysis of the ECB's actions are cautionary. I have sufficient irons in the fire to accept their caution at present. Attached is their most recent report...pls see starting on page 25.

http://www.fiduciarymgt.com/funds/shrpt/ann_shrpt_093017.pdf

BenWP

I meant QFVOX.

mcmarasco

PRESSmUP thank you for the read. They appear to be very pessimistic and cautious near-term which is ok, it's their job to do what they feel is best for the L-T, i get that.

I just hope that the SIGNIFICANT under-performance does not continue thru 2018 (and beyond). As you mentioned, the previous 3 years were outstanding, a reversal of that performance (i.e. 2017) would make that moot and FMIJX/FMIYX just another fund.

I do not think that will happen, but I am " hedging" and have reduced my investment to just over 9% and as slick mentioned (thx), I am dipping my toe into a growth oriented International fund.

Thanks everyone for your comments, please continue the conversation!!! Matt

BrianW

'mcmarasco', regarding hedging please remember that had you been invested in a Growth fund you would likely have to re-balance funds out, not in. Meaning you would likely add to the FMI fund, not reduce. 2018 may be another banner year, but are you making the classic mistake of buying high when you should allow FMI to pull back?

MikeM

I think you make a good point @BrianW. Are the odds better for a correction or for the market to continue up indefinitely? That's really what you would be betting on by hedging to a more aggressive fund. I understand the hedge, just that it may be the wrong time to do it. All a game we play to eek out a little extra return.

districtwanderer

FMIJX returned 15.5% in 2017. I'll take that every single time, thank you!

Know what you own and why you own it. FMIJX is exactly where one would expect it to be. If you are even looking at 2018 performance--which is to say around 12 trading days so far--you are better off indexing.

BrianW

If you aren't a purist (Value Investor), may I suggest a simple FOMO checker. I would setup a hypothetical portfolio on Morningstar. I would use Index funds divided equally between Value and Growth. Your decision point is when either becomes 5% out of band. If you have your eye on this Growth fund, buy it when Value is 5% greater (55% of the portfolio). This isn't perfect, but it will keep your emotions in check.

BrianW

By the way, FOMO = Fear Of Missing Out.

mcmarasco

Very valid points made by all. Maybe "hedge" was the wrong term and misused as BrianW points out.

I almost feel like adding to FMIJX now or waiting for it to pull-back further, could be trying to catch a "falling knife"; i'm just not sure and maybe way off.

NO DOUBT 13 months does not a trend make. But if significant under-performance continues for the next year or two and I have not, at least, consider another alternative, am i not doing myself a disservice? I'm not divesting from FMIJX, just reducing it from low-to-mid double-digits to just over 9%. I don't believe that's unreasonable, maybe i'm wrong though.

As BriansW says FOMO is maybe what is motivating me to branch out. The category is doing very well, but what will happen when the category goes south? Is FMIJX going to be the superhero as in the past? There are concerns as have been previously pointed out, asset bloat, weaker$, etc.

Lastly, I'm not saying 15.5% absolute return is bad; I would take it EVERY YEAR, but we all know that is a pipe dream. I guess my thoughts are if FMIJX continues to SIGNIFICANTLY under-perform the category, is it not worth a look-see and try to enhance performance while the getting is good?

Please let me know if I am off-base and/or missing the point! Thx!!!!

JoJo26

@districtwanderer his the nail on the head. You need to know why you own everything you do, particularly concentrated/high tracking error strategies like FMI. If you can't tolerate the tracking error, then the strategy is not well-suited for your portfolio.

MikeM

+1... what JoJo said.

I personally think we all at some point try to over think our investments or lose faith in an investing philosophy that made perfect sense for a while. Human nature I guess. FMIJX may very well under-perform it's peers in 2018. I still believe the management strategy fits what I want in my portfolio and remains a good choice over the cycle, so to answer your initial question, I'm not losing confidence. I found trying to eek out returns by jumping to or adding on "better performing funds" at the time just doesn't work for me.

Kind of what you said in another post,

My "timing" is atrocious, almost never benefits me.

mcmarasco

Well said!!!!!

My words come back to haunt me, deservedly!

Thx!!

BrianW

@mcmarasco: Please review the final days of the dotcom era. During this time the shareholders of Yacktman, FPA Crescent and other Value funds were in revolt. They were displeased because the Managers would not follow the crowd upward. Were they wrong? It is easy for us to choose Value Managers, after the fact. We all agree these funds are great to have, but most of us identify them, after the fact. You chose FMI for a reason, perhaps their performance, as noted by others, is exactly as it should be. You need to find a way to defeat your emotions. Ask yourself, why does Value historically beat Growth? I will venture to say, its because people invest emotionally. It is counter intuitive to buy what's out of favor. At this time that would be Value. I own all three FMI funds. I'm very happy with their performance. I'm just as concerned with what can be lost as with what can be gained. Perhaps the only thing under-performing, is your perspective. I mean that respectfully.

mcmarasco

BrianW no disrespect taken; you are 100% accurate. I chose FMIJX for a reason several years ago and that reason has not changed, nor have my goals or needs.

Thank you for your perspective and wise words!! Matt

BrianW

You're welcome and good luck.

Kaspa

Have held FMIJX for a long time, and have been adding small amounts every month for a very long time. While I agree that you should not wed your funds, if you believe they are sticking to the strategy you bought them for, you should stay put. In general, when the markets start to go well ahead of solid value oriented funds, I see a correction coming.

BrianW

@mcmarasco, see what I mean?

JoJo26

Late to the party and taking credit. Keep patting yourself on the back.... It'll get you places.

BrianW

@JoJo26: It isn't patting myself on the back. During this conversation he and I have been discussing what amounts to being patient. The comment was for him and he knows my intentions were constructive.

mcmarasco

Thanks everyone for the conversation and suggestions, I value all comments and sometimes you have to hear what you don't want to hear.

Matt

JoJo26

BrianW said:

@JoJo26: It isn't patting myself on the back. During this conversation he and I have been discussing what amounts to being patient. The comment was for him and he knows my intentions were constructive.

SMH